Best practices for GPs, LPs and their advisors
One of the most complex issues in private equity, carry has been the subject of intense political debate and wider public scrutiny in recent times. The mechanics of the waterfall calculation, with its multiple components, is also the source of much misunderstanding and confusion for both GPs and LPs, making it difficult for LPs to validate the GP-reported carry.
This groundbreaking new title by Mariya Stefanova of PEAI is packed full of guidance and best practice approaches that will demystify the subject, help practitioners peel back the layers of the calculation, and aid understanding.
- An easy step-by-step guide to the waterfall calculation.
- Best practices for modelling carry.
- A comprehensive guide to accounting and reporting considerations.
- How new technology is helping GPs and LPs with carry calculation and verification.
- An overview of changes to the tax treatment of carry in the UK.
- Unique LP perspectives on carry, including from ILPA.
- A leading academic offers thoughts on a new carry mechanism for GP/LP alignment.
Who should buy this book
- Fund controllers
- Fund accountants
- Fund administrators
- Mariya Stefanova, PEAI
- Christopher Good, Macfarlanes LLP
- James McCredie and Alicia Thomas, Macfarlanes LLP
- Tarek Mardini and Ronald Buge, P+P Pöllath + Partners
- Andrew Ahern, Debevoise & Plimpton LLP
- Gert-Tom Draisma, Tristan Finance
- Joe Greenwell and JP Harrop, Augentius
- Simon Havers, Odgers Berndtson Executive Search
- Tom Pittman and Robert Hagmeier, EWM Global
- Jennifer Choi, ILPA
- Lorelei Graye, Consultant
- Charles Dooley, AcordIQ
- Oliver Gottschalg
- Luba Nikulina, Willis Towers Watson
- Institutional Limited Partners Association (ILPA), June 2017
About the author
SECTION 1: An Introduction to Carried Interest
1 Carried interest — The ‘captain’s share’
SECTION 2: Structuring Carried Interest: Tax and Legal Issues
2 Structuring carried interest: Legal considerations
3 Taxation of carried interest in the UK
4 Tax and legal treatment of carried interest in Germany
5 Carry tax and legal treatment: Country snapshots
6 Corporate and commercial trends in carried interest terms
SECTION 3: Best Practice for Fund Managers
7 The waterfall calculation: From the lawyer’s drawing board to the back office desk
8 Best practices for modelling carried interest
9 Scoring GP waterfall models
10 Carried interest: Accounting and reporting considerations
11 Using technology to calculate and recognise carried interest on the GP side
SECTION 4: Subscription Lines of Credit and their Impact on Carried Interest and IRR
12 Capital call bridge facilities: Impact on investment performance and carried interest
13 How subscription lines of credit can ‘disturb’ the net IRR and TWR, and accelerate carry
SECTION 5: Carried Interest as an Incentive Mechanism
14 Carried interest as an incentive mechanism: Advantages and disadvantages
15 Carried interest employee incentive structures
SECTION 6: LP Perspectives
16 How LPs view the role of carry in GP/LP alignment
17 Case Study In pursuit of transparency and digital reporting: The LP experience
18 Carry validation: Why and what are the options available to LPs?
19 How new technology is enabling LPs’ to verify GP-reported carry
SECTION 7: Rethinking Carry
20 Towards a new carry mechanism for aligning interests
21 Rewarding true value creation in private equity: Implications for LPA economic terms
Appendix — Subscription lines of credit and alignment of interests: Considerations and best practices for limited and general partners