How does carry get paid out when a fund puts an asset into a CV? Assuming the deal generates carry, and all of the LPs elect to roll their interests into the CV, where is the cash to pay out carry coming from? No cash is changing hands and even if you were to dilute the LPs interest by the carry they have to pay, there would be no cash to actually pay for it. Even if some LPs elected to cash out, only those LPs would have cash proceeds to pay the carry, so the LPs that rolled wouldn't pay out carry. What am I missing?
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The accrued carry in the original fund gets converted into an LP commitment that pays out Pari-passu with all actual LP money. There is no capital at risk anymore
There is no carry “paid” it’s all rolled
When they say "roll" it means that it is literally converted into an LP commitment. That LP commitment then gets paid out in line with when all actual LPs get paid. The GP gets new incremental carry from the CV. So if an asset is bought for par value, the unrealized carry gets converted into an LP commitment and on day 1 of the CV it looks like their is no carry anymore
CVs usually come with their own terms, so they have the potential to earn new carry over their 3-5 year term. Sponsor generally expected to roll 100 pct of their earned carry on the asset or assets into the deal.
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