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Carried interest, or carry, in finance, is a share of the profits of an investment paid to the investment manager specifically in alternative investments (private equity and hedge funds). It is a performance fee , rewarding the manager for enhancing performance. [ 3 ]
In the case of a hedge fund, this means that the partner defers taxation on the income that the hedge fund earns, which is typically ordinary income (or possibly short-term capital gains), due to the nature of the investments most hedge funds make. Private equity funds, however, typically invest on a longer horizon, with the result that income ...
Direct vs. Indirect Ownership of Real Property – Private equity real estate investing involves the acquisition, financing and direct ownership and holding of the title to an individual property or portfolios of properties, as well as the indirect ownership and holding of a securitized or other divided or undivided interest in a property or portfolio of properties through some form of pooled ...
The carry of an asset is the return obtained from holding it (if positive), or the cost of holding it (if negative) (see also Cost of carry). [1] For instance, commodities are usually negative carry assets, as they incur storage costs or may suffer from depreciation. (Imagine corn or wheat sitting in a silo somewhere, not being sold or eaten.)
A private equity fund is raised and managed by investment professionals of a specific private-equity firm (the general partner and investment advisor). Typically, a single private-equity firm will manage a series of distinct private-equity funds and will attempt to raise a new fund every 3 to 5 years as the previous fund is fully invested. [1]
Real estate makes up the largest asset class in the world. Much larger than bonds and stocks, which respectively rank second and third by total market cap. Real estate investing involves the purchase, management and sale or rental of real estate for profit.
When liquidating the fund, if the LPs were distributed less than the agreed preferred return, they claw back the missing amount from the carried interest distributed to the GP. [5] [6] The clawback clause is triggered at the very end of the fund, at a time where the General Partner may have already put the clawback amount to other use.
The following year, in 2004, Bank One sold a $1 billion portfolio of private-equity fund interests to Landmark Partners and the State of Connecticut Retirement and Trust completed the sale of a portfolio of private-equity fund interests to Coller Capital, representing one of the first secondary market sales by a US pension.