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By Alicia McElhaney

Thom Young has spent the better part of the past 13 years trying to better align the financial interests of investment managers and asset owners.

The former hedge fund manager and consultant is now president at FARCapital, which helps investment managers implement fund alignment rights - an options structure to use in lieu of annual incentive fees.

"I'm trying to get to a level playing field where everyone is aligned," Young said in an interview. "The manager can earn even more money for long-term performance. The LPs get the skin in the game, and everyone is better off for long-term performance."

The problem: Finding a manager and an allocator to take a chance on this new structure. Young and his team have faced several obstacles so far, including an IRS ruling process interrupted by a government shut down and a last-minute pullout from a public pension fund. But they have now found a willing manager: a new investment firm founded by ex-Invesco employees.

First, though, a primer on fund alignment rights. In a typical fund structure, managers pull carry - or incentive fees - out on an annual basis, selling assets in the process. That money is distributed to employees and taxed. For managers who hold assets for less than three years, which is the case for many active investors, this capital is taxed at ordinary rates.

A fund alignment right - or FAR - structure operates differently. Rather than managers pulling carry out of a fund each ye......................

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