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By Jina Yoon, Chief Alternative Investment Strategist for LPL Financial. Additional content provided by Michael McClain, AVP, Research.
On July 4, President Trump signed into law the "One Big Beautiful Bill Act (OBBBA)", a far-reaching piece of legislation that will impact the U.S. investment landscape for years to come. While there is an incredible amount of detail in the 869-page text, as it relates to alternative investments, there are several key takeaways for investors to consider.
Carried Interest
• Carried interest is a fee many private investment managers charge in addition to the more common flat management fee. The OBBBA preserves the current favorable tax treatment as carried interest will continue to be taxed at long-term capital gain rates. However, the holding period for long-term capital gains treatment increases from three to five years for fund managers.
• Investment Implications: While this is a common topic during election season, the decision by OBBBA to maintain the tax treatment of carried interest is a significant relief for fund managers. Increasing the required holding period by two years will marginally reduce after-tax returns, however, it is not expected to have a meaningful impact on the industry.
College Endowment Taxation
• The OBBBA increases taxes on investment income derived from college endowments. Colleges with more than 3,000 students and an endowm...................... To view our full article Click here
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