Carried Interests like, investment, funding, change, adjust

draz

Sounds like part of the proposed funding for the new Jobs Act is to tax the carry earned by hedge funds and other investment partnerships at the marginal rate as opposed to the cap gains rate. I don't work in the field, but am curious from those that do what (if any) impact a change like this may have. Are there strategies that can be used to adjust for the heavier tax burden?

torontoanalyst

Could you put a reference to that part of the Job Act?

RoastBeef

The Tax Revenue impact will be a small percentage in terms of the overall bill....something like $14B of the $400B+.

In terms of the impact in the PE world, the GP of the PE funds would lose the tax benefit of carried interest currently being taxed @ cap gain rates vs. the proposed ordinary rates (30%+)...so basically the MDs of PE Shops will be paying 15%+ more in taxes on carry than they normally would.

I don't see managers adjusting strategies to compensate for this.

anish

Just to be clear, I wasn't referring to changes in trading strategies. I was referencing how these partnerships are structured (i.e. you mentioned the GP), or maybe they go from '2 and 20' to '3 and 15'. Again, I'm not in that field but am curious if this is discussed in any HF shops, etc.

Darien

The Point Wrote:
-------------------------------------------------------
> The Tax Revenue impact will be a small percentage
> in terms of the overall bill....something like
> $14B of the $400B+.
>
> In terms of the impact in the PE world, the GP of
> the PE funds would lose the tax benefit of carried
> interest currently being taxed @ cap gain rates
> vs. the proposed ordinary rates (30%+)...so
> basically the MDs of PE Shops will be paying 15%+
> more in taxes on carry than they normally would.

What's the source of this information?

king_kong

Thanks for the link. I didn't know that carried interest meant accrued incentive fees. It will be interesting to see the final version of the bill since it might still go through substantial changes.

Houjichasan

Don't think the impact will be large on hedge funds, most don't hold assets long enough to be benefit from capital gains rates anyways. Doesn't seem to stop the papers from reporting that 'all hedge fund managers are cheating the government with their 15% tax rates' though.