carried interest is different in that the Principal gets some of the capital gains from other people's investment. If

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Jan 15, 2020
2:39:45pm

HarlemCoug All-American

carried interest is different in that the Principal gets some of the capital gains from other people's investment. If

your investors invest along side you and their share of the capital grows from $40 to $100... then there is $60 of income... but the investor has to pay you a fee of about $12... So they will have $100-12-40= $48 of capital gain and the Principal will have $12 of carried interest.

This message has been modified

Originally posted on Jan 15, 2020 at 2:39:45pm

Message modified by HarlemCoug on Jan 15, 2020 at 2:41:59pm

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HarlemCoug

Previous username: Big12
Bio page: HarlemCoug
Joined: Sep 8, 2014
Last login: May 4, 2024
Total posts: 32,291 (4,030 FO)

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Messages

Author

Time

For those of you who understand "carried interest" would you consider it a

BYU71

1/15/20 2:22pm

I would say it is a tax gimmick. I don't think getting compensated for actual

Coach's Dad

1/15/20 2:28pm

Here’s a good explanation

cougarfann888

1/15/20 2:29pm

Wish that was available to all of us. I give investment advice for a 1% fee.

BYU71

1/15/20 2:33pm

That's because they are "taking a risk." I'm not sure why their risk deserves

Archaea

1/15/20 3:04pm

One other idea for the very, very RICH. Let them set up their foundations

BYU71

1/15/20 2:29pm

if the government controls how the money is used then it works exactly like a tax. No one would put money into a

HarlemCoug

1/15/20 2:32pm

Exactly, but we are letting the rich do something we can't.

BYU71

1/15/20 2:36pm

They also appear to be providing a service which we can't provide

Indy Coug

1/15/20 2:36pm

they are doing so much good. they are better at allocating capital. we should stay out of their way. Sure, there are

HarlemCoug

1/15/20 2:40pm

Carried interest is different from ordinary income in that in order to earn CI you have to put up capital. You

HarlemCoug

1/15/20 2:30pm

I agree they should be taxed differently. If what you say is correct, why

BYU71

1/15/20 2:35pm

carried interest is different in that the Principal gets some of the capital gains from other people's investment. If

HarlemCoug

1/15/20 2:39pm

Why should someone who is selling his knowledge to the client get capital gain treatment? The manager is risking no

CDV

1/15/20 2:46pm

Do the fund managers actually put up their money or are they

Archaea

1/15/20 3:06pm

Are they technically borrowing their clients funds?

Superman21

1/15/20 3:09pm

I imagine that it happens but raising capital when you don't have any "skin in the game" would be very unusual.

HarlemCoug

1/15/20 3:16pm

I have seen both scenarios but couldn't understand how the manager without

Archaea

1/15/20 3:22pm

Except your "skin the game" would get the benefits of your money management

Coach's Dad

1/15/20 3:27pm

yes - they want Principals to pay ordinary income rates rather than capital gains rates.

HarlemCoug

1/15/20 3:42pm

Is that true in all cases that they put up capital? I thought regular investment

Coach's Dad

1/15/20 2:43pm

Besides, I think the investment managers will get the beneficial tax treatment

Coach's Dad

1/15/20 2:45pm

I don't think regular invesmtent advisors get "carried interest".

BYU71

1/15/20 2:57pm

I audited hedge funds as my 1st job out of BYU. I saw a ton of structures. In every case the GP had his own money in

HarlemCoug

1/15/20 3:19pm

Does the manager get a higher percentage than the amount of money

Archaea

1/15/20 3:23pm

It's most common for people to put up less than 20% of the fund's capital in the early years... But, over time, since

HarlemCoug

1/15/20 3:40pm

Whose money is at risk?

Busiturtle

1/15/20 3:32pm

I'm not an expert by any means, but it seems more like an incentive for taking on higher levels of risk

Indy Coug

1/15/20 2:31pm

Agreed. Some very limited thinking doesn't understand risk/reward and

BYU71

1/15/20 2:38pm

Wait a sec. every sales job in the world has that same risk but gets no carried interest special exception. It is all

CDV

1/15/20 2:42pm

<< Deleted >>

HarlemCoug

1/15/20 2:43pm

If you consult for the 2 and 20 and structure it, you could get that

Archaea

1/15/20 3:08pm

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