Wed, Oct 18, 2017
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. Regulatory - David Stockman: Trump tax reform overhaul is a pipe dream, stocks are heading for 40-70% plunge, Carried interest tax: How much does it matter?, Odey sees 'terrifying' mix in MiFID, tapering, asset values, Hedge funds come together to share cost of MiFID and research, SEC turns up the heat on U.S. investment advisers, India's Sebi asks hedge funds to report investments in commodity derivatives[more]

    David Stockman: Trump tax reform overhaul is a pipe dream, stocks are heading for 40-70% plunge From CNBC.com: David Stockman is warning about the Trump administration's tax overhaul plan, Federal Reserve policy, saying they could play into a severe stock market sell-off. Stockman, the R

  2. North America - Puerto Rico rejects loan offers, accusing hedge funds of trying to profit off hurricanes[more]

    From TheIintercept.com: Puerto Rico has rejected a bondholder group's offer to issue the territory additional debt as a response to the devastation of Hurricane Maria. Officials with Puerto Rico's Fiscal Agency and Financial Advisory Authority said the offer was "not viable" and would harm the islan

  3. Investing - WPP targeted by short-selling American hedge fund, Sun co-founder sells secretive hedge fund on big chip trade[more]

    WPP targeted by short-selling American hedge fund From Cityam.com: An American hedge fund has mounted a bet against WPP, the world's largest advertising group, with a trade worth almost £90m. Lone Pine Capital has built a short position worth 0.51 per cent of the FTSE 100 company,

  4. Hedge funds up as industry adjusts to rising rates[more]

    Komfie Manalo, Opalesque Asia: Hedge funds have reshuffled their portfolio after nearly four weeks of rising rates as the Lyxor Hedge Fund Index was up +0.2% from 19 September to 26 (+1.1% YTD), fuelled by strong results of global macro funds, Lyxor Ass

  5. Manager Profile - How the world's hedge fund king used 'idea meritocracy' to become a billionaire[more]

    From Forbes.com: In 1982, Ray Dalio made what he calls the biggest mistake of his life. He made a bet that there would be an economic collapse stemming from a debt crisis. And he was wrong. He lost money. He lost his client's money. He had to let people go from his firm and borrow money from his dad