Stupid question about carry
Stupid question from an ignorant M&A guy that is trying to learn the way. How is carry allocated/ how does it work in a credit hedge fund vs an equities hedge fund? For me the equities its clear, and similar in PE in the way that you earn the 20% from any capital gains you make (in PE is illiquid and takes X amount of year, and in public equities is yearly). But how does it work in a credit HF? If you are a lender you would normally wait until maturity? Is that also considered a capital gain and thus taxed lower than a standard company bonus (i.e banking)?
Thank you
Bump
For all intents and purposes, forget about earning carry at a HF for tax purposes. You might get paid a % of P&L but I've never heard of anyone getting paid carry PE-style, which by the way I believe now requires a 3 year holding period before it qualifies as long-term gains.
TLDR, forget about it.
So you pay marginal income tax rate on all forms of HF compensation? No high water mark-style carry?
To the first question, essentially yes, you pay regular wage income tax rate.
To the second, I don't see how HWM has anything to do with this discussion.
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