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

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Jan 15, 2020
3:23:47pm

Archaea All-American

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

he has in the fund? It seems the few deals I saw, the manager had no way invested 20%.

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Archaea

Bio page: Archaea
Joined: Mar 28, 2001
Last login: May 4, 2024
Total posts: 93,766 (3,090 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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