Sun, Oct 2, 2022
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Other Voices: A decade-long quest to build a better fee structure

Tuesday, August 30, 2022

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......................

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. Opalesque Exclusive: This European mezzanine debt strategy offers equity-like returns with downside protection[more]

    B. G., Opalesque Geneva for New Managers: Mezzanine financier SIG-i operates in a relatively uncrowded space by proactively manufacturing financing solutions as an alternative to traditional debt and equity instrume

  2. Opalesque Video: Systematic Japan strategy follows the 'Keep it Simple' rule[more]

    B. G., Opalesque Geneva: For those looking to invest in the current opportunities underlying managed futures in Japan, here is a strategy that does just that, with the benefits of leverage, shorts, Big Data, proprietary technology, and academic research on market psychology. K2Q Capital'

  3. Opalesque Exclusive: Castle Hall's DiligenceExchange free Transparency Reports cover 100 managers with $10tn of assets[more]

    Matthias Knab, Opalesque for New Managers: Managers and investors can get free access to DiligenceExchange here: Castle Hall, the Du

  4. Opalesque Exclusive: How blockchain is helping the small guy invest in hedge funds[more]

    B. G., Opalesque Geneva: ADDX, Asia's largest private market exchange, is on a mission to democratise the private capital markets through blockchain and smart contract technology. With these technologies, the exchange can eliminate manual interven

  5. Opalesque Exclusive: Japan quant strategy uses academia as starting point of investment research[more]

    B. G., Opalesque Geneva: Shin Samurai is a thorough systematic Japan macro strategy, which takes advantage of behavioural biases by using mathematical and statistical techniques. It also relies heavily on academic research for idea generation, and combines the said research with a deep understand