Sat, Jun 23, 2018
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

IRS issues new ruling on incentive fees

Friday, June 27, 2014

Bailey McCann, Opalesque New York:

Incentive fees - a long time hot topic between investors and managers may be getting an update courtesy of the IRS. The IRS recently ruled that private fund managers can structure their incentive fees to provide a multi-year fee instead of an annual fee. The ruling is notable because it could help managers during their early fundraising years, but it may also help institutional investors grind down fees more.

"I think this could be an opportunity in the end for managers to work with investors on how fees are handled," Tim Selby, Partner at Alston & Bird tells Opalesque. Selby is also the President and Director of the Hedge Fund Roundtable.

The ruling specifically removes some of the uncertainty surrounding stock appreciation rights (SAR), which previously kept investors from supporting multi-year arrangements. In 2008, tax law was changed to remove the ability of investment managers to offshore compensation in Cayman based vehicles in order to avoid income tax. Some managers have continued to do this with a clawback allowance that makes it possible.

With a multi-year arrangement, the performance requirements that might trigger a clawback provision if not met, require managers to do well over the life of the fund instead of in a given year. This is a boon for institutions who are long term investors, but could be tricker for managers hoping to avoid taxation but may also have a bad year.

Still, there may be additional ......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Paper: The performance of stocks actively pitched by hedge funds[more]

    Using a novel dataset drawn from investment conferences from 2008 to 2013, I show that hedge funds take advantage of the publicity of these conferences to strategically release their book information to drive market demand. Specifically, hedge funds sell pitched stocks after the conferences to ta

  2. North America - US fundraising for special purpose acquisition vehicles hits record this year[more]

    From AFR.com: Special purpose acquisition vehicles (spacs) are hitting the US market at the fastest rate on record, attracting the likes of Goldman Sachs and hedge fund investor Daniel Loeb for the two largest such deals in 2018. Spacs have raised $US4.5bn so far in 2018, the largest amount fo

  3. Investing - Man Group and AQR try to take aim at private equity industry, Hedge funds poised to be winners in AT&T-Time Warner deal[more]

    Man Group and AQR try to take aim at private equity industry From FT.com: The popularity of private equity investments has prompted asset managers such as Man Group and AQR to devise strategies that aim to replicate PE returns but at a much lower cost to investors. Both companies a

  4. News Briefs: David Stemerman's hedge fund holdings shrank before his run for governor, nvestment manager TSW triggers succession plan, Alan Howard joins Peter Thiel investing in Cologne-based fintech startup[more]

    David Stemerman's hedge fund holdings shrank before his run for governor But the U.S. holdings of Stemerman's Greenwich hedge fund, Conatus Capital, shrank from $2.6 billion at the apex to just over $1 billion before he announced his move into politics. (Hartford Courant) Inv

  5. British Empire: Pershing's 23% discount 'unsustainable'[more]

    From Citywire: The wide discount on Pershing Square Holdings (PSH) is 'unsustainable' and puts star hedge fund manager Bill Ackman under pressure, says British Empire (BTEM). Pershing is the third largest holding in the £850 million British Empire trust, managed by Joe Bauernfreund, which sp