Author: Gert-Tom Draisma / www.TristanFinance.com

First published: 24th of September 2026

Latest update: 5th of October 2026

Status: First Draft

1. From Economic Interests to the Carry Cap Table

Part IV established what a participant can own.

A participant may hold:

• a percentage of a carry pool;
• carry points;
• carry units;
• an interest in a particular class;
• a direct interest;
• an indirect interest through a carry vehicle;
• or several different interests simultaneously.

Those interests now need to be recorded.

The carry cap table is the structure through which participant ownership of defined carry economics is represented.

At its simplest:

Carry Pool → Participant Interests → Carry Cap Table

But a robust carry cap table needs to answer considerably more than:

Who owns what percentage today?

It should be capable of answering:

Who owns which carry economics?

Through which interest?

In what proportion?

On what basis?

From what date?

Until what date, if applicable?

How did that ownership position arise?

What would the ownership have been at an earlier date?

The carry cap table is therefore not merely a list of percentages.

A carry cap table is a time-dependent record of economic ownership.

2. What Is a Carry Cap Table?

A carry cap table records ownership of a defined carry pool.

The word defined is important.

A cap table does not describe ownership of “carry” in the abstract.

It describes ownership of a particular economic population.

For example:

Fund III Employee Carry Pool

or:

Fund IV Investment A Carry Pool

or:

European Growth Strategy Carry Pool

The cap table then records how that economic population is divided.

The fundamental relationship is:

Defined Carry Pool + Participant Ownership = Carry Cap Table

3. A Carry Cap Table Is Not a Company Cap Table

The terminology resembles a corporate capitalisation table, but the economics can be different.

A company cap table typically records ownership of shares or other securities in a company.

A carry cap table records participation in a defined stream of carried-interest economics.

The participant may own a legal partnership interest, share or unit, but the economic purpose of the cap table is to establish the participant's entitlement to the relevant carry pool.

Therefore:

Company Ownership ≠ Carry Ownership

and:

Company Cap Table ≠ Carry Cap Table

A participant may own 10% of a management company and 20% of a particular carry pool.

Those are separate economic relationships.

4. The Basic Carry Cap Table

Consider a simple employee carry pool containing 100 points.

If the relevant carry pool is €20 million:

This is a valid simple cap table.

But it is only sufficient if the economics themselves are equally simple.

5. The Missing Denominator

A cap table should always identify the carry pool to which it relates.

Consider:

This table is incomplete.

Thirty percent of what?

A better presentation is:

Carry Plan: Fund III Carry Plan

Carry Pool: Fund III Employee Carry Pool

Measurement: Fully Diluted Economic Interest

The denominator has now been identified.

Therefore:

Participant Percentage + Defined Carry Pool = Meaningful Cap Table Position

6. The Minimum Cap Table Dimensions

A useful carry cap table will commonly require at least:

• participant;
• carry plan;
• fund or relevant economic population;
• carry pool;
• class, where applicable;
• points, units or percentage;
• economic percentage;
• effective date;
• status.

For more complex arrangements, it may also require:

• grant date;
• issue date;
• vesting commencement date;
• end date;
• legal holder;
• beneficial owner;
• fully diluted percentage;
• issued-basis percentage;
• source transaction;
• governing document reference;
• approval reference;
• and historical transaction information.

The cap table should reflect the actual complexity of the economics.

7. Participant

The participant appears to be the simplest dimension.

But even participant identity requires control.

The same person may appear under:

• different legal names;
• different employing entities;
• different carry vehicles;
• different jurisdictions;
• or different historical identifiers.

A robust system should therefore distinguish between:

Participant Identity

and:

Participant Carry Interest

The participant is the person or entity.

The carry interest is the economic relationship.

One participant can have many carry interests.

8. Carry Plan

A participant may participate in more than one carry plan.

For example:

Partner A may participate in:

Fund II Plan;

Fund III Plan;

Growth Strategy Plan;

Special Deal Plan.

The plan therefore forms part of the economic identity of the interest.

A percentage recorded without the plan can become ambiguous.

Conceptually:

Participant + Plan + Pool = Starting Point for Carry Ownership

9. Fund or Economic Population

The cap table should identify the fund or other economic population from which the carry originates.

For example:

Fund III

Fund IV

2029 Vintage

European Buyout

Infrastructure Strategy

Investment A

The relevant population should follow the allocation architecture established in Part III.

A field labelled merely “Fund” may therefore be insufficient where the carry architecture operates at several levels.

10. Carry Pool

The carry pool is one of the most important dimensions.

Suppose Fund III contains:

Sponsor Pool;

Employee Pool;

Leadership Pool;

Deal Pool.

A participant may have different interests in each.

For example:

It would be misleading to record:

Partner A — 15% carry.

The participant has three distinct economic interests.

Therefore:

A carry cap table records ownership of a defined carry pool, not ownership of “the carry” in the abstract.

11. Class

Where a carry pool contains several classes, the cap table should identify the relevant class.

For example:

Fund III Employee Carry Pool

Class A — Partners

Class B — Principals

Class C — Other Participants

If the classes have different economic rights, class identification is essential.

Even if the classes currently have identical economic rights, recording the class may still be important for legal, administrative or future purposes.

Therefore:

Participant + Pool + Class = More Precise Economic Identity

12. Points or Units

Where participant ownership is represented through points or units, the cap table should record the quantity.

For example:

But the point balance alone is not sufficient.

The cap table should also identify the relevant denominator and resulting percentage.

13. Economic Percentage

If all points rank equally:

Economic Percentage = Participant Points / Relevant Total Points

For Participant A:

250 / 1,000 = 25%

The cap table may therefore show:

The percentage is derived from the points.

It should therefore be possible to reconcile the two.

14. Issued-Basis Percentage

Suppose only 600 of the 1,000 points have been issued.

Issued:

A = 250

B = 200

C = 150

Reserve = 400

On an issued basis:

A:

250 / 600 = 41.67%

B:

200 / 600 = 33.33%

C:

150 / 600 = 25.00%

The cap table can therefore show both:

But which percentage determines current carry depends on the plan.

15. Current Economic Percentage

The cap table may therefore need a third percentage:

Current Economic Percentage

Suppose the reserve does not participate economically until granted.

Then current economics might be:

A = 41.67%

B = 33.33%

C = 25.00%

If instead the reserve economically belongs to the sponsor until allocated, the participant economics could be different again.

Therefore:

Issued Percentage ≠ Fully Diluted Percentage ≠ Necessarily Current Economic Percentage

The cap table should distinguish these concepts where they differ.

16. Grant Date

The grant date records when the carry award was granted or approved.

For example:

Grant date: 15 March 2030

This may be relevant for:

• governance;
• documentation;
• vesting;
• tax;
• participant communication;
• and audit trail.

But the grant date does not necessarily determine when the participant begins sharing in the economics.

Therefore:

Grant Date ≠ Necessarily Economic Effective Date

17. Economic Effective Date

The economic effective date determines when the participant's economic interest begins to apply.

Suppose:

Grant approved: 15 March 2030

Economic participation effective: 1 January 2030

The participant may economically participate from 1 January despite formal approval occurring later.

Alternatively:

Grant approved: 15 March 2030

Economic participation effective: 1 April 2030

The economics begin after the grant.

The distinction should be explicit.

18. Vesting Commencement Date

The vesting commencement date may be different again.

For example:

Grant date: 15 March 2030

Economic effective date: 1 January 2030

Vesting commencement: 1 July 2029

These dates serve different purposes.

They should not be collapsed into one generic “start date.”

Therefore:

Grant Date ≠ Economic Effective Date ≠ Necessarily Vesting Start Date

Detailed vesting mechanics are addressed in Chapter 7.

The cap table nevertheless needs to preserve the relevant dates.

19. Ownership Through Time

Suppose Partner A receives:

1 January 2028: 10%

1 January 2030: additional 5%

1 January 2032: reduction of 3%

The current position is:

12%

But recording only 12% loses the ownership history.

The historical positions were:

2028–2029: 10%

2030–2031: 15%

2032 onward: 12%

This matters whenever participant economics depend on the ownership percentage applicable at a particular date.

Therefore:

Current Ownership ≠ Historical Ownership

20. The Cap Table as a Snapshot

A cap table dated 31 December 2030 might show:

This is a snapshot.

It answers:

Who owns the carry pool on 31 December 2030?

It does not necessarily answer:

Who owned the pool on 31 December 2028?

or:

Who was entitled to carry generated by an investment realised in 2029?

Historical questions require historical ownership data.

21. The Ownership Ledger

A stronger model records transactions rather than only closing balances.

For Partner A:

This creates an ownership ledger.

The cap table at any date can then be derived from the ledger.

Conceptually:

Opening Ownership + Ownership Transactions = Closing Ownership

and:

Historical Ownership Ledger → Cap Table at Any Date

22. Snapshot Versus Source of Truth

This leads to an important distinction.

A spreadsheet showing today's ownership may be a useful report.

But it should not necessarily be the source of truth.

The more robust architecture is:

Ownership Transactions → Historical Ledger → Current Cap Table

rather than:

Current Cap Table → Attempt to Reconstruct History

Therefore:

A current carry cap table is only a view of an underlying historical ownership ledger.

23. Transaction Types

The ownership ledger should classify transactions.

Possible transaction types include:

• initial grant;
• additional grant;
• promotion grant;
• transfer;
• reallocation;
• cancellation;
• forfeiture;
• return to reserve;
• pool expansion;
• correction;
• split;
• consolidation;
• class conversion;
• participant transfer;
• and other defined events.

The transaction type explains why ownership changed.

Without it, the system records only arithmetic.

24. Opening and Closing Ownership

For each period:

Opening Ownership + Increases − Decreases = Closing Ownership

For points:

Opening Points + Granted Points + Points Received − Points Transferred − Points Cancelled = Closing Points

For example:

Opening: 100 points

Additional grant: +25

Transfer received: +10

Transfer out: −5

Cancellation: −10

Closing:

100 + 25 + 10 − 5 − 10 = 120 points

This basic reconciliation should be available for every participant interest.

25. Pool-Level Reconciliation

The same reconciliation applies to the carry pool.

Suppose:

Opening issued points: 800

New grants from reserve: +100

Cancellations returned to reserve: −50

Closing issued points:

800 + 100 − 50 = 850

If total authorised points remain 1,000:

Closing reserve:

1,000 − 850 = 150

The participant ledger and pool ledger should reconcile.

26. The 100% Control

At any effective date, the economic population should reconcile to the applicable denominator.

For a percentage-based pool:

Σ Participant Interests + Reserved / Sponsor / Other Defined Interests = 100%

For a point-based pool:

Σ Participant Points + Reserved Points = Total Relevant Points

This is a fundamental cap-table control.

But:

100% Reconciliation ≠ Correct Cap Table

A perfectly reconciled cap table can still be wrong.

27. A Reconciled but Wrong Cap Table

Suppose the correct cap table is:

A = 40%

B = 30%

C = 20%

Reserve = 10%

But an administrator records:

A = 35%

B = 35%

C = 20%

Reserve = 10%

Total:

100%.

The cap table reconciles.

It is still wrong.

Reconciliation detects incompleteness.

It does not prove contractual correctness.

Therefore:

Arithmetic Reconciliation ≠ Economic Validation

28. Source Documentation

Each ownership transaction should ideally be traceable to supporting documentation.

Examples include:

• carry-plan documents;
• partnership agreements;
• grant letters;
• award agreements;
• board or committee approvals;
• partner resolutions;
• transfer agreements;
• leaver determinations;
• side agreements;
• amendments;
• and correction approvals.

The cap table should therefore support:

Cap Table Position → Ownership Transaction → Supporting Document → Approval

This creates defensibility.

29. Document Reference

A practical cap-table ledger may contain fields such as:

This transforms the cap table from a spreadsheet of balances into a controlled ownership record.

30. Approval Versus Effective Date

The example also demonstrates another distinction.

Approval date:

15 March 2030

Economic effective date:

1 January 2030

This may be valid if the governing arrangements permit it.

But it should be visible.

Backdated economics should never arise merely because an administrator changed a spreadsheet.

Therefore:

Backdated Entry ≠ Approved Retroactive Economic Effect

A retroactive economic change should have appropriate authority and documentation.

31. Corrections Versus Economic Changes

Historical data may need correction.

Suppose a grant was legally effective from 1 January 2030 but was accidentally entered as 1 February 2030.

Correcting the date is not necessarily a new economic transaction.

It may simply correct the record.

Compare that with a decision made in June 2030 to increase the participant's interest retrospectively from January.

That is a substantive economic change.

Therefore:

Correction of Historical Record ≠ Retroactive Change in Economics

The ledger should distinguish the two.

32. Audit History

If historical ownership records can be edited, the system should preserve the audit trail.

For example:

Original entry:

Effective date: 1 February 2030

Corrected entry:

Effective date: 1 January 2030

Correction date:

15 June 2030

Reason:

Original data-entry error

Approved by:

Carry Administrator / Reviewer

The historical record should show what changed and why.

Otherwise, historical cap tables can silently change.

33. Never Overwrite History

A particularly dangerous practice is simply replacing old percentages with new percentages.

Suppose:

Original spreadsheet:

Partner A = 10%

After promotion:

Partner A = 15%

If the administrator simply changes 10% to 15%, the spreadsheet now implies that Partner A always owned 15%.

The historical 10% position has disappeared.

Therefore:

New Ownership Position Should Not Overwrite Historical Ownership

Instead:

10% → Effective Until Date

and:

15% → Effective From Date

or, preferably, record the transaction producing the change.

34. Effective-Dated Ownership

A simple effective-dated model might contain:

This allows the ownership position to be reconstructed for any date.

But a transaction ledger is generally more informative because it also explains the movement between states.

35. State Model Versus Transaction Model

Two principal data approaches are possible.

State Model

Record the ownership applicable during each period.

Transaction Model

Record changes to ownership and derive the state.

For simple plans, either may work.

For complex plans, the transaction model often provides stronger historical traceability.

Conceptually:

Transactions → Ownership State

rather than:

Ownership States Without Explanation

The two can also be maintained together, with one derived from the other.

36. One Participant, Multiple Cap Tables

Suppose Partner A participates in:

Fund II Employee Pool: 10%

Fund III Employee Pool: 15%

Fund IV Employee Pool: 20%

Growth Strategy Pool: 12%

Investment X Pool: 30%

There is no single Partner A cap-table percentage.

Instead:

Partner A → Multiple Carry Pools → Multiple Cap-Table Positions

The participant view is therefore an aggregation of multiple underlying cap tables.

37. One Fund, Multiple Cap Tables

Similarly, one fund may have:

• sponsor cap table;
• employee cap table;
• leadership pool;
• operating partner pool;
• investment-specific pools.

Therefore:

One Fund ≠ One Carry Cap Table

The number of cap tables follows the number of distinct economic populations.

38. One Carry Vehicle, Multiple Cap Tables

A single legal carry vehicle may also contain several economic classes or pools.

For example:

Carry Partnership LP:

Class A — Fund III

Class B — Fund IV

Class C — Growth Strategy

The legal entity has one ownership register.

But economically there may be several separate cap tables.

Therefore:

One Legal Vehicle ≠ One Economic Cap Table

This distinction is critical when legal records are used as the source for participant economics.

39. Multiple Vehicles, One Economic Cap Table

The reverse can also occur.

A single economic pool may be implemented through several legal vehicles.

For example:

US participants → US Carry Vehicle

European participants → European Carry Vehicle

Other participants → Main Carry Vehicle

If all participate in the same underlying economic pool, the organisation may need a consolidated economic cap table across the vehicles.

Therefore:

Multiple Legal Vehicles ≠ Necessarily Multiple Economic Pools

The economic perimeter should determine the cap-table view.

40. Legal Cap Table Versus Economic Cap Table

This suggests a useful distinction.

Legal Cap Table

Records legal ownership of the relevant vehicle.

Economic Cap Table

Records ultimate participation in the defined carry economics.

The two should reconcile where appropriate.

But they are not necessarily identical.

Therefore:

Legal Cap Table ≠ Economic Cap Table

This distinction is particularly important where:

• nominees are used;
• trusts are used;
• multiple carry vehicles exist;
• participants hold interests indirectly;
• classes have different economics;
• or beneficial and registered ownership differ.

41. Registered Holder Versus Beneficial Participant

Suppose a nominee company legally holds carry interests for ten participants.

The legal register may show:

Nominee Ltd — 100%

But the economic cap table may show:

A — 20%

B — 15%

C — 15%

D–J — 50%

Both records may be correct.

They answer different questions.

Therefore:

Registered Ownership ≠ Beneficial Economic Ownership

A robust carry administration system should be able to connect the two.

42. Look-Through Cap Tables

Where ownership is layered, a look-through cap table can show ultimate participant economics.

Suppose:

Employee Vehicle = 60% of GP carry.

Class A = 70% of Employee Vehicle.

Partner A = 40% of Class A.

Effective interest:

60% × 70% × 40% = 16.8% of GP carry

A look-through cap table might therefore show:

But the look-through percentage is a derived result.

The underlying ownership layers should remain available.

43. Current Cap Table Versus Fully Diluted Cap Table

A carry plan may need several cap-table views.

Current Issued Cap Table

Shows currently issued interests.

Fully Diluted Cap Table

Includes relevant reserve or authorised interests.

Current Economic Cap Table

Shows the percentages actually participating in current economics.

These may differ.

A single percentage column can therefore create ambiguity.

44. Example of Multiple Cap-Table Views

Assume:

A = 300 points

B = 250

C = 150

Reserve = 300

Total authorised = 1,000

Issued = 700.

Fully Diluted

A = 30%

B = 25%

C = 15%

Reserve = 30%

Issued Basis

A:

300 / 700 = 42.86%

B:

250 / 700 = 35.71%

C:

150 / 700 = 21.43%

If reserve does not participate until granted, the issued-basis percentages may also be current economic percentages.

If reserve economics belong to another party until grant, a different current economic cap table may be required.

Therefore:

Cap Table View Must Identify Its Denominator

45. Date of the Cap Table

Every cap table should have an effective date.

For example:

Fund III Employee Carry Pool — Cap Table as at 31 December 2030

Without a date, the cap table is incomplete whenever ownership changes through time.

The principle is simple:

Cap Table + No Effective Date = Potentially Ambiguous Ownership

This becomes increasingly important as a carry plan matures.

46. Transaction Date Versus Record Date

A carry transaction may involve several dates.

For example:

Decision date: 15 March

Legal execution date: 31 March

Economic effective date: 1 January

System-entry date: 2 April

These dates should not be confused.

The economically relevant date depends on the governing arrangements.

The system should preserve the other dates where they are operationally or legally relevant.

47. Historical Cap Tables

A robust system should be able to produce:

Fund III Employee Carry Pool — Cap Table as at 31 December 2028

and:

Fund III Employee Carry Pool — Cap Table as at 31 December 2030

and:

Fund III Employee Carry Pool — Cap Table as at 31 December 2032

without manually reconstructing old spreadsheets.

This is one of the principal advantages of maintaining historical ownership transactions.

48. Why Historical Cap Tables Matter

Historical ownership may be required for:

• participant distributions;
• realised carry allocations;
• clawback;
• tax;
• disputes;
• leaver calculations;
• audits;
• regulatory enquiries;
• financial reporting;
• participant statements;
• legal due diligence;
• and transaction diligence.

Carry funds can exist for many years.

Historical ownership therefore needs to survive personnel changes, system migrations and organisational restructuring.

49. Current Ownership Versus Historical Entitlement

Suppose Partner A owns 20% today.

That does not necessarily mean Partner A owns 20% of carry generated historically.

The participant may previously have owned:

5%;

then 10%;

then 15%;

and now 20%.

Therefore:

Current Ownership ≠ Historical Entitlement

This is one of the most important principles in carry cap-table administration.

50. Ownership Date Versus Economic Generation Date

A deeper question arises:

Which ownership date determines entitlement to a particular amount of carry?

Possible approaches could reference:

• investment date;
• realisation date;
• carry crystallisation date;
• distribution date;
• allocation date;
• participant grant date;
• or another contractually defined date.

There is no universal answer.

The carry plan must determine the relevant rule.

Therefore:

Historical Ownership Data + Allocation Rule = Historical Participant Entitlement

The cap table provides the ownership history.

The plan determines how that history interacts with carry generation.

51. Cap Table Does Not Determine the Rule by Itself

A cap table can tell us:

Partner A owned 10% on 1 January 2029.

It cannot necessarily tell us whether Partner A is entitled to 10% of a distribution made in 2031.

That depends on the plan.

For example, the plan might allocate economics based on:

• ownership when the investment was made;
• ownership when carry was realised;
• ownership when carry was distributed;
• or another methodology.

Therefore:

Cap Table Data ≠ Complete Participant Allocation Methodology

The cap table records ownership.

The carry plan explains how that ownership is applied.

52. Multiple Ownership Dates

Some plans may effectively require more than one ownership concept.

For example:

Current ownership;

historical realised ownership;

unrealised ownership;

clawback responsibility;

vested ownership.

These may not all move together.

A participant could have:

0% current future participation;

10% historical realised entitlement;

8% remaining unrealised entitlement;

and continuing clawback exposure to prior distributions.

Therefore:

One Participant ≠ Necessarily One Relevant Percentage at One Date

This is why participant carry administration can become materially more complex than a conventional current-state cap table.

53. Current Versus Historical Carry Populations

Consider a participant who leaves after receiving distributions.

The participant may no longer own future carry.

But historical carry already allocated may remain relevant.

Similarly, a new joiner may own future economics but no historical carry.

The system should therefore distinguish between:

Current Carry Ownership

and:

Historical Carry Entitlement

and, where relevant:

Historical Carry Responsibility

These are related but not identical concepts.

54. Carry Cap Table and Vesting

The cap table records economic ownership.

Vesting determines how much of that ownership the participant ultimately retains under specified conditions.

Suppose:

Participant interest: 10%

Vested: 60%

It may be tempting to state:

Effective Carry = 6%

But that may be too simplistic.

The participant may economically participate through the full interest while forfeiture provisions apply to the unvested portion.

Alternatively, only vested interests may participate.

The treatment depends on the plan.

Therefore:

Ownership Percentage ≠ Necessarily Vested Percentage

and:

Vesting Percentage ≠ Necessarily Current Economic Participation Percentage

Chapter 7 examines this in detail.

55. Carry Cap Table and Distributions

A participant cap table should also be distinguishable from a distribution schedule.

Suppose the cap table shows:

A = 30%

B = 25%

C = 20%

Reserve = 25%

A €10 million cash distribution does not necessarily mean:

A receives €3m;

B receives €2.5m;

C receives €2m;

Reserve receives €2.5m.

There may be:

• vesting restrictions;
• escrow;
• tax advances;
• prior distributions;
• holdbacks;
• clawback reserves;
• legal vehicle mechanics;
• or other rules.

Therefore:

Carry Cap Table ≠ Distribution Schedule

The cap table is an input into participant allocation, not necessarily the final cash-payment instruction.

56. Carry Cap Table and Participant Value

Similarly:

Carry Cap Table ≠ Participant Valuation

A 20% interest does not have a monetary value until it is connected to the relevant carry pool.

Even then, current indicative value may differ from final value.

The cap table tells us ownership.

The waterfall and underlying fund economics determine the value of the carry pool.

The participant allocation combines them.

Therefore:

Waterfall → Carry Pool Value

Cap Table → Participant Ownership

Carry Pool Value × Applicable Ownership → Participant Carry Position

57. Cap Table and Fund Waterfall

The cap table should not be used to calculate the fund waterfall unless the governing economics specifically require participant-level information.

The normal direction is:

Fund Economics → Fund Waterfall → Carry Generated → Carry Pool → Cap Table → Participant Allocation

not:

Participant Cap Table → Fund Carry

This preserves the distinction between fund economics and internal participant economics.

58. Cap Table and Multiple Waterfalls

Where several fund waterfalls or economic streams feed the same participant pool, the cap table may apply to the combined pool.

Alternatively, separate cap tables may apply to each stream.

The correct treatment depends on the carry plan.

For example:

Fund III Main Carry: €20m

Fund III Co-Invest Carry: €5m

If both feed the same employee pool:

Relevant Employee Carry Pool = €25m

If separate participant populations apply:

Main Carry → Cap Table A

Co-Invest Carry → Cap Table B

The architecture should determine the data structure.

59. Cap Table Granularity

The required cap-table granularity follows the allocation architecture.

Fund-level allocation:

Participant × Fund Pool

Vintage-level allocation:

Participant × Vintage Pool

Investment-level allocation:

Participant × Investment Pool

Hybrid allocation:

Participant × Fund × Strategy × Investment × Pool × Class

The formula may remain simple.

The number of economic relationships may become large.

Therefore:

Allocation Granularity → Cap-Table Granularity

60. Cap Table Explosion

Suppose a manager has:

8 funds;

15 investments per fund;

3 strategy pools;

40 carry participants.

A simple fund-level plan might require only eight primary cap tables.

A deal-level plan could require more than 100 investment-level cap tables.

If participant interests differ across investments and time, the number of historical ownership relationships can become much larger.

This creates what might be called cap-table dimensionality.

The problem is no longer calculating percentages.

The problem is maintaining the correct economic relationships.

61. The Cap Table as a Relational Structure

A robust carry system can therefore be understood relationally.

The principal objects include:

Participant

Carry Plan

Carry Pool

Class

Interest

Ownership Transaction

Effective Date

Supporting Document

These objects are connected.

For example:

Participant A

owns:

Interest 123

in:

Fund III Employee Carry Pool

under:

2029 Carry Plan

through:

Class A

created by:

Grant Transaction 456

effective:

1 January 2030

supported by:

Grant Agreement 789

This is considerably more robust than storing:

A — 15%.

62. Participant Master Data

The participant master should identify the participant independently of individual carry interests.

Useful fields may include:

• participant ID;
• legal name;
• preferred name;
• employing entity;
• jurisdiction;
• join date;
• leave date;
• status;
• and other relevant administrative identifiers.

Sensitive personal data should be controlled appropriately.

The important structural principle is:

One Participant Master → Many Carry Interests

63. Carry Pool Master Data

Each carry pool should also have its own identity.

Useful fields may include:

• pool ID;
• plan;
• fund;
• vintage;
• strategy;
• investment;
• legal vehicle;
• class structure;
• currency;
• authorised points;
• economic source;
• start date;
• status;
• and governing documentation.

This ensures that participant interests point to a defined economic population.

64. Ownership Transaction Data

Each ownership transaction should contain enough information to reconstruct the cap table.

Typical fields include:

• transaction ID;
• participant;
• carry pool;
• class;
• transaction type;
• points or units;
• percentage where relevant;
• effective date;
• approval date;
• legal execution date;
• source participant or reserve;
• destination participant or reserve;
• document reference;
• approval reference;
• entered by;
• reviewed by;
• and timestamp.

The exact fields depend on the carry architecture.

The principle does not:

Ownership Should Be Reconstructable from Controlled Transactions

65. Derived Data

Certain cap-table fields should preferably be derived rather than manually entered.

For example:

• current points;
• issued percentage;
• fully diluted percentage;
• look-through percentage;
• current ownership;
• historical ownership at a selected date.

If the underlying transactions and denominators are controlled, these values can be calculated.

This reduces the risk of conflicting manually maintained percentages.

Conceptually:

Controlled Inputs → Derived Ownership State

66. Enter Once, Derive Many

Suppose a grant of 50 points is entered once.

That transaction may update:

• participant point balance;
• pool issued points;
• reserve balance;
• issued percentage;
• fully diluted percentage;
• current cap table;
• participant statement;
• historical ownership record;
• and audit report.

This is preferable to manually updating each output separately.

Therefore:

Single Controlled Transaction → Multiple Derived Views

This is an important systems principle for carry administration.

67. Avoiding Duplicate Sources of Truth

A common operational risk is maintaining the same ownership information in several places:

HR spreadsheet;

legal spreadsheet;

finance spreadsheet;

carry model;

participant statement file;

external administrator file.

If each is manually maintained, they can diverge.

The organisation then has several versions of “the cap table.”

A stronger model identifies one controlled economic ownership record from which other views are derived.

Therefore:

Multiple Reports ≠ Multiple Sources of Truth

68. Legal Records and Economic Records

This does not mean the economic cap table replaces legal records.

Legal registers may remain authoritative for legal ownership.

HR systems may remain authoritative for employment status.

Fund accounting systems may remain authoritative for distributions.

The objective is to establish clear system ownership.

For example:

Legal System → Legal Ownership

HR System → Employment Status

Carry Ledger → Economic Carry Ownership

Fund Accounting → Fund Cash Flows

These systems then need controlled interfaces and reconciliation.

69. Reconciliation to Legal Documentation

The carry ledger should periodically reconcile to legal documentation.

For example:

Total Class A legal units: 1,000

Carry ledger Class A units: 1,000

Participant-by-participant ownership should also agree where legal and economic ownership are intended to be identical.

Where they differ, the difference should be explainable.

Therefore:

Difference ≠ Necessarily Error

but:

Unexplained Difference = Control Problem

70. Reconciliation to Participant Statements

Participant statements should also reconcile to the cap table.

If the cap table records:

Partner A = 150 points

the participant statement should not show 140 unless there is a defined reason.

Likewise, participant percentages should be derived consistently.

This creates:

Carry Ledger → Participant Statement

rather than:

Participant Statement as Independent Calculation

71. Reconciliation to Carry Allocations

When carry is allocated to participants:

Σ Participant Allocations + Defined Unallocated Amounts = Relevant Carry Pool

Suppose:

Carry pool = €20m

Participant allocations:

A = €5m

B = €4m

C = €3m

Other participants = €6m

Reserve / sponsor = €2m

Total:

€20m

This should reconcile to the source carry pool.

The cap table provides the ownership basis for the allocation.

72. Reconciliation Across Time

Carry ownership should also reconcile from period to period.

For example:

Opening cap table at 1 January 2030

plus:

2030 ownership transactions

equals:

Closing cap table at 31 December 2030.

This can be expressed:

Opening Ownership + Period Transactions = Closing Ownership

Any unexplained movement should be investigated.

73. Missing Grant Detection

Suppose a participant statement shows a 15% interest.

The carry ledger shows 10%.

The difference could indicate:

• missing grant;
• unprocessed amendment;
• incorrect participant statement;
• incorrect effective date;
• or duplicate/missing transaction.

The reconciliation process should identify the discrepancy.

The objective is not merely to force the percentages to agree.

It is to identify the correct economic position.

74. Duplicate Grant Detection

The reverse problem is a grant recorded twice.

Suppose an approved grant is 50 points.

The system contains two identical 50-point transactions.

The participant now appears to own 100 additional points.

The total cap table may still reconcile if the reserve is correspondingly reduced twice.

Therefore:

Cap Table Reconciliation Alone May Not Detect Duplicate Transactions

Transaction-level controls are necessary.

75. Effective-Date Errors

Suppose a grant is correctly recorded as 50 points but with an effective date one year too early.

The current cap table may be correct.

Historical allocations may be wrong.

This illustrates:

Correct Current Ownership ≠ Correct Historical Ownership

Effective dates are therefore fundamental economic data.

76. Wrong-Pool Errors

Another dangerous error is allocating the correct participant percentage to the wrong pool.

Suppose Partner A has:

20% Fund III;

10% Fund IV.

If 20% is accidentally applied to Fund IV, the cap table can still reconcile to 100%.

The error is economic, not arithmetic.

Therefore:

Correct Percentage + Wrong Pool = Wrong Carry

This mirrors the broader principle:

Correct Formula + Wrong Economic Perimeter = Wrong Carry

77. Wrong-Class Errors

Similarly, a participant may be assigned to the wrong class.

If Class A and Class B currently have identical economics, the error may initially appear harmless.

But if the classes later have different:

• vesting;
• priorities;
• voting rights;
• transfer restrictions;
• or distribution rules,

the error becomes material.

Master-data accuracy therefore matters even where immediate calculations appear unaffected.

78. Wrong-Denominator Errors

Suppose Participant A owns 100 points.

The correct denominator is 1,000.

Correct interest:

10%

If the administrator incorrectly uses 800 issued points:

100 / 800 = 12.5%

Both calculations are mathematically correct.

Only one uses the correct economic denominator.

Therefore:

Correct Arithmetic + Wrong Denominator = Wrong Economic Ownership

79. Cap Table Governance

Changes to participant carry ownership should be governed.

A useful governance process may include:

Proposal → Approval → Documentation → Cap Table Transaction → Independent Review → Participant Communication

The exact process will depend on the organisation.

But ownership should not change merely because someone edits a spreadsheet.

80. Segregation of Duties

Where practical, the person entering a cap-table transaction should not be the only person validating it.

For example:

Administrator enters grant.

Reviewer verifies:

• participant;
• pool;
• points;
• effective date;
• approval;
• documentation;
• and denominator.

The transaction is then approved or released.

This reduces operational risk.

81. Materiality Is Not Only Monetary

A one-point error may appear financially small today.

But the relevant fund could later become highly successful.

An apparently immaterial ownership error can therefore become material over time.

Carry ownership also has personal significance to participants.

Consequently:

Small Percentage Error × Large Future Carry Pool = Large Economic Error

Carry cap-table controls should therefore not rely solely on current monetary materiality.

82. Participant Confirmation

Some organisations may use participant confirmations as an additional control.

For example, an annual statement might show:

• carry plan;
• fund;
• pool;
• points;
• percentage;
• grant history;
• vesting information;
• realised carry;
• unrealised indicative carry.

Participants can then identify apparent discrepancies.

Participant confirmation does not replace internal controls.

But it can provide an additional verification layer.

83. Transparency

Greater transparency can improve participants' understanding of their economics.

A statement such as:

You have 100 carry points.

may provide little information.

A more useful statement might show:

Fund III Employee Carry Pool

Points: 100

Total fully diluted points: 1,000

Fully diluted interest: 10%

Current carry pool: €15m

Indicative gross carry position: €1.5m

subject to the applicable vesting, leaver, clawback, tax and other rules.

The objective is not merely to report numbers.

It is to make the economic relationship understandable.

84. Transparency Does Not Eliminate Uncertainty

An unrealised carry value remains dependent on fund valuations and future outcomes.

Therefore participant reporting should distinguish:

Ownership Certainty

from:

Value Uncertainty

The participant's 10% interest may be contractually clear.

The eventual value of that 10% may remain highly uncertain.

Therefore:

Certain Percentage ≠ Certain Value

85. Indicative Value Should Be Labelled

If unrealised carry values are shown, they should be described appropriately.

Possible terminology includes:

• indicative carry value;
• current calculated carry;
• unrealised carry position;
• estimated carry entitlement;
• or another clearly defined term.

The reporting should avoid implying that unrealised carry is guaranteed cash.

Therefore:

Calculated Unrealised Carry ≠ Guaranteed Future Distribution

86. Currency

Carry pools may exist in different currencies.

A participant may therefore have:

Fund A carry in EUR;

Fund B carry in USD;

Fund C carry in GBP.

A consolidated participant statement may translate these into a reporting currency.

But the underlying cap-table interests should preserve the original economic currencies where relevant.

Therefore:

Reporting Currency ≠ Underlying Economic Currency

Foreign-exchange translation should not alter ownership percentages.

87. Multiple Jurisdictions

International organisations may maintain carry vehicles in several jurisdictions.

A participant could hold:

a UK partnership interest;

a Luxembourg carry vehicle interest;

a US profits interest;

or another local instrument.

The legal and tax characteristics may differ.

But the economic cap-table framework remains:

Participant → Instrument → Carry Pool → Economic Interest

This allows different legal implementations to be analysed through a consistent economic framework.

88. Transfers Between Vehicles

Suppose a participant moves country and their carry interest is transferred from one carry vehicle to another.

Economically, the intention may be to preserve the participant's carry position.

Legally, one interest may be cancelled and another created.

The cap-table system should distinguish:

Legal Vehicle Migration

from:

Economic Ownership Change

If the participant continues to own exactly the same economics, the legal restructuring should not accidentally appear as a new economic grant.

Therefore:

Change in Legal Wrapper ≠ Necessarily Change in Economic Ownership

89. Participant Transfers

A participant may also transfer economic ownership to another participant.

Suppose:

A transfers 5% to B.

Opening:

A = 25%

B = 15%

Closing:

A = 20%

B = 20%

The ledger should preserve:

Source: A

Destination: B

Amount: 5%

Effective date

Approval

Documentation

The closing cap table alone does not explain the transfer.

90. Reserve Movements

The reserve should also be treated as an economic account.

Suppose:

Opening reserve: 20 points

Grant to A: −5

Forfeiture returned from B: +3

Grant to C: −4

Closing reserve:

20 − 5 + 3 − 4 = 14 points

This allows the reserve to reconcile like any other ownership population.

Therefore:

Reserve Is an Economic Population, Not a Plug

91. Sponsor Retained Interest

The same applies to sponsor-retained economics.

Suppose the sponsor retains 20% of the participant pool until allocated.

If 5% is subsequently granted to a new participant, the cap table should record whether:

• the sponsor transfers 5%;
• the pool expands by 5%;
• the reserve provides 5%;
• or another mechanism applies.

The economic event should be explicit.

92. Cap Table Versioning

Where cap tables are distributed as documents or spreadsheets, version control becomes important.

A cap table might be labelled:

Fund III Employee Carry Pool

Effective Date: 31 December 2030

Report Generated: 15 January 2031

Version: 3

This distinguishes:

Economic Effective Date

from:

Report Generation Date

and:

Document Version

A later correction can then be identified clearly.

93. Reproducing Historical Reports

Ideally, a system should be able to reproduce a historical cap table based on the data known and effective at the relevant time.

There are two distinct questions:

What do we now believe the cap table was at 31 December 2030?

and:

What cap table did we actually report on 31 December 2030?

If subsequent corrections occurred, the answers may differ.

For high-quality administration, both can matter.

94. Economic History Versus Reporting History

This introduces another distinction:

Economic History

What the correct ownership was economically.

Reporting History

What was reported at the time.

Suppose an error discovered in 2032 shows that Partner A actually owned 15% in 2030, although the 2030 statement reported 10%.

The corrected economic history should show 15%.

But the audit trail should preserve that 10% was originally reported.

Therefore:

Corrected Economic History ≠ Erasure of Reporting History

95. Historical Reconstruction

Carry arrangements are sometimes administered for years without a robust ledger.

A later system implementation may therefore require historical reconstruction.

Potential sources include:

• partnership agreements;
• grant letters;
• board approvals;
• historic spreadsheets;
• participant statements;
• distribution records;
• tax records;
• email approvals;
• and legal registers.

The objective is to reconstruct:

Opening Ownership → Historical Transactions → Current Ownership

This can be difficult where records conflict.

96. Hierarchy of Evidence

Where historical records conflict, the organisation may need an agreed hierarchy of evidence.

For example:

1. executed legal documentation;
2. formally approved resolutions;
3. contemporaneous cap-table records;
4. participant statements;
5. distribution history;
6. other supporting records.

The appropriate hierarchy depends on the legal arrangements and circumstances.

The important point is that discrepancies should be resolved deliberately rather than silently.

97. Distribution History as a Control

Historical distributions can provide useful evidence.

Suppose records suggest Partner A owned 10%, but historical distributions consistently paid A 15%.

This does not prove that 15% was correct.

The distributions themselves could have been wrong.

But the discrepancy requires investigation.

Therefore:

Historical Payment ≠ Proof of Historical Ownership

It is evidence to be reconciled against the governing arrangements.

98. Cap Table Migration

When moving from spreadsheets to a new system, migration should preserve more than current balances.

Ideally, migration includes:

• participant history;
• pool definitions;
• historical transactions;
• effective dates;
• classes;
• reserves;
• supporting references;
• and prior distributions where relevant.

Migrating only current percentages can permanently lose historical economic information.

Therefore:

Current-State Migration ≠ Historical Carry Migration

99. Opening Balance Migration

Sometimes complete historical transactions cannot be reconstructed.

The organisation may then establish an approved opening position at a defined migration date.

For example:

Opening cap table as at 1 January 2030 based on approved historical reconstruction.

Subsequent transactions can then be recorded fully.

This does not recreate missing history.

But it establishes a controlled starting point.

The limitation should remain documented.

100. Cap Table Certification

For material carry arrangements, periodic certification may be useful.

For example, annually:

• administrator prepares cap table;
• finance reconciles;
• legal verifies relevant ownership records;
• responsible partner or committee approves;
• participant statements are produced.

The objective is to establish that the cap table is not merely operational data.

It is a controlled record of potentially substantial economic ownership.

101. Worked Example — Initial Cap Table

Assume Fund V generates carry through an employee pool.

Total authorised points:

1,000

Initial allocation:

Fully diluted percentages:

A = 30%

B = 20%

C = 15%

D = 10%

Reserve = 25%

Assume the reserve does not participate economically until granted.

Issued points:

750

Current economic percentages are therefore:

A:

300 / 750 = 40%

B:

200 / 750 = 26.67%

C:

150 / 750 = 20%

D:

100 / 750 = 13.33%

This example immediately demonstrates why the denominator matters.

102. Worked Example — New Joiner

One year later, Partner E joins.

E receives 100 points from the reserve.

Closing cap table:

Issued points are now:

850

If the reserve remains non-participating, current issued-basis percentages become:

A = 35.29%

B = 23.53%

C = 17.65%

D = 11.76%

E = 11.76%

The fully diluted percentages of existing participants have not changed.

Their current issued-basis percentages have.

103. Worked Example — Promotion

Principal D is promoted and receives an additional 50 points from reserve.

New positions:

A = 300

B = 200

C = 150

D = 150

E = 100

Reserve = 100

Total = 1,000

D's fully diluted interest increases:

100 / 1,000 = 10%

to:

150 / 1,000 = 15%

The transaction is:

Reserve → D: 50 Points

This is more informative than merely changing D's percentage from 10% to 15%.

104. Worked Example — Departure

Partner C subsequently leaves and forfeits 100 of their 150 points.

Assume the forfeited points return to reserve.

Then:

C = 50

Reserve = 200

All other point balances remain unchanged.

The cap table remains:

1,000 total points.

No fully diluted dilution or accretion occurs for the other participants.

If instead the 100 points had been cancelled, the denominator would become 900 and everyone else's percentages would increase.

Therefore the destination of forfeited interests matters.

105. Worked Example — Transfer

Founder A transfers 50 points to Partner B.

Before:

A = 300

B = 200

After:

A = 250

B = 250

Total points remain unchanged.

The transaction does not create new carry economics.

It reallocates existing ownership.

The historical ledger should record:

A → B: 50 Points

106. Worked Example — Pool Expansion

The firm later decides to create 100 additional points for senior recruitment.

Total authorised points increase:

1,000 → 1,100

If the new points are placed into reserve, all existing fully diluted interests are diluted.

Founder A, now holding 250 points:

Before expansion:

250 / 1,000 = 25%

After expansion:

250 / 1,100 = 22.73%

A's points did not change.

The denominator did.

This is a genuine dilution event.

107. The Full Transaction History

The example can now be represented as a ledger:

The final cap table can be derived from the transaction history.

But the history tells us considerably more than the final cap table.

108. Why the Final Cap Table Is Not Enough

The final table shows:

A = 250

B = 250

C = 50

D = 150

E = 100

Reserve = 300

Total = 1,100

It does not reveal:

• that E joined later;
• that D was promoted;
• that C forfeited points;
• that A transferred points to B;
• or that the pool expanded.

Those events may have important consequences for:

• historical carry;
• tax;
• vesting;
• clawback;
• legal rights;
• and participant reporting.

Therefore:

Closing Ownership State ≠ Ownership History

109. Cap Table as an Economic Ledger

The carry cap table should therefore be understood in two forms.

Cap Table View

The ownership position at a selected date.

Cap Table Ledger

The transactions that created that ownership position.

The relationship is:

Cap Table Ledger → Cap Table View

The ledger is the underlying economic history.

The view is the result at a particular date.

110. The Core Carry Cap Table Equation

The central equation can be expressed as:

Opening Ownership + Ownership Events = Closing Ownership

At participant level:

Opening Interest + Grants + Transfers In − Transfers Out − Forfeitures − Cancellations ± Other Adjustments = Closing Interest

At pool level:

Opening Pool + Pool Expansion − Pool Reduction = Closing Pool

These equations provide the basis for cap-table reconciliation.

111. The Cap Table as Part of the Carry Calculation Chain

The complete carry chain can now be extended.

Earlier chapters established:

Fund Economics → Fund Waterfall → Carry Generated

Part III established:

Carry Generated → Carry Pool

Part IV established:

Carry Pool → Participant Economic Interests

Part V now establishes:

Participant Economic Interests → Historical Carry Cap Table

The complete chain becomes:

Fund Economics → Fund Waterfall → Carry Generated → Carry Pool → Carry Cap Table → Participant Allocation

The cap table is therefore the bridge between the economics of the carry pool and the economics of individual participants.

112. The Control Chain

A robust participant allocation should be traceable backwards:

Participant Carry Allocation

↓

Applicable Cap Table Position

↓

Ownership Transactions

↓

Carry Pool

↓

Carry Allocation Architecture

↓

Fund Carry

↓

Fund Waterfall

↓

Underlying Fund Economics

This produces:

Final Participant Entitlement → Participant Allocation → Carry Cap Table → Carry Pool → Waterfall Result → Economic Events → Source Data → Governing Provisions

The same traceability principle that applies to fund carry therefore extends all the way to the individual participant.

113. Questions a Carry Cap Table Should Answer

A well-designed carry cap-table system should be able to answer questions such as:

• Who currently participates in Fund III carry?
• What percentage does each participant own?
• What is the fully diluted percentage?
• How many points remain reserved?
• What did Partner A own on 31 December 2029?
• When was Partner B's latest grant effective?
• Where did those points come from?
• Which document approved the grant?
• Which class does Partner C own?
• Which participants share Investment X carry?
• What is Partner D's effective look-through interest?
• What changed during the year?
• Does the cap table reconcile to 100%?
• Does it reconcile to the legal ownership records?
• Can every ownership movement be explained?

If these questions cannot be answered reliably, the organisation does not yet have a fully controlled carry cap table.

114. What a Carry Cap Table Should Not Be

A carry cap table should not be:

• an unexplained list of percentages;
• a spreadsheet that overwrites historical ownership;
• a copy of the management-company share register;
• a distribution schedule;
• a vesting schedule;
• a participant valuation;
• a substitute for governing documentation;
• or a manually maintained snapshot without an audit trail.

It may interact with all of these.

But it performs a distinct function.

Its function is to record:

Who owns which carry economics, in what proportion, and during which period.

115. Core Principles

The principal concepts developed in Part V can be summarised as follows:

A Carry Cap Table Is a Time-Dependent Record of Economic Ownership

Defined Carry Pool + Participant Ownership = Carry Cap Table

Company Ownership ≠ Carry Ownership

Company Cap Table ≠ Carry Cap Table

Participant Percentage + Defined Carry Pool = Meaningful Cap Table Position

Participant Identity ≠ Participant Carry Interest

One Participant Master → Many Carry Interests

Participant + Plan + Pool = Starting Point for Carry Ownership

A Carry Cap Table Records Ownership of a Defined Carry Pool, Not Ownership of “the Carry” in the Abstract

Participant + Pool + Class = More Precise Economic Identity

Issued Percentage ≠ Fully Diluted Percentage ≠ Necessarily Current Economic Percentage

Grant Date ≠ Necessarily Economic Effective Date

Grant Date ≠ Economic Effective Date ≠ Necessarily Vesting Start Date

Current Ownership ≠ Historical Ownership

Opening Ownership + Ownership Transactions = Closing Ownership

Historical Ownership Ledger → Cap Table at Any Date

A Current Carry Cap Table Is Only a View of an Underlying Historical Ownership Ledger

Backdated Entry ≠ Approved Retroactive Economic Effect

Correction of Historical Record ≠ Retroactive Change in Economics

New Ownership Position Should Not Overwrite Historical Ownership

Same Closing Cap Table ≠ Same Ownership History

One Participant → Multiple Carry Pools → Multiple Cap-Table Positions

One Fund ≠ One Carry Cap Table

One Legal Vehicle ≠ One Economic Cap Table

Multiple Legal Vehicles ≠ Necessarily Multiple Economic Pools

Legal Cap Table ≠ Economic Cap Table

Registered Ownership ≠ Beneficial Economic Ownership

Cap Table View Must Identify Its Denominator

Cap Table + No Effective Date = Potentially Ambiguous Ownership

Current Ownership ≠ Historical Entitlement

Historical Ownership Data + Allocation Rule = Historical Participant Entitlement

Cap Table Data ≠ Complete Participant Allocation Methodology

Current Carry Ownership ≠ Historical Carry Entitlement ≠ Historical Carry Responsibility

Ownership Percentage ≠ Necessarily Vested Percentage

Carry Cap Table ≠ Distribution Schedule

Carry Cap Table ≠ Participant Valuation

Waterfall → Carry Pool Value

Cap Table → Participant Ownership

Carry Pool Value × Applicable Ownership → Participant Carry Position

Allocation Granularity → Cap-Table Granularity

Ownership Should Be Reconstructable from Controlled Transactions

Controlled Inputs → Derived Ownership State

Single Controlled Transaction → Multiple Derived Views

Multiple Reports ≠ Multiple Sources of Truth

Difference ≠ Necessarily Error

Unexplained Difference = Control Problem

Correct Current Ownership ≠ Correct Historical Ownership

Correct Percentage + Wrong Pool = Wrong Carry

Correct Arithmetic + Wrong Denominator = Wrong Economic Ownership

Reserve Is an Economic Population, Not a Plug

Change in Legal Wrapper ≠ Necessarily Change in Economic Ownership

Corrected Economic History ≠ Erasure of Reporting History

Historical Payment ≠ Proof of Historical Ownership

Current-State Migration ≠ Historical Carry Migration

Closing Ownership State ≠ Ownership History

Cap Table Ledger → Cap Table View

Final Participant Entitlement → Participant Allocation → Carry Cap Table → Carry Pool → Waterfall Result → Economic Events → Source Data → Governing Provisions

The carry cap table now tells us who owns the defined carry economics and preserves that ownership through time.

Part VI considers what happens when that ownership changes:

How should grants, promotions, transfers, reallocations, dilution, pool expansions, cancellations and other changes in carry ownership be treated?

Need assistance with your Carried Interest Challenges? Reach out to us:

[email protected]

Or ask your questions here:

References and Further Reading

Internal Ownership and Allocation of Private Equity Economics

Ivashina, Victoria and Josh Lerner. “Pay Now or Pay Later? The Economics within the Private Equity Partnership.” Journal of Financial Economics, Vol. 131, No. 1, 2019, pp. 61–87.

Relevant subjects include:

• allocation of fund economics among individual partners;
• carried-interest ownership;
• management-company ownership;
• founder versus non-founder economics;
• differences in allocations between partners;
• internal economic inequality;
• partner departures;
• succession;
• retention;
• and continuity across fund generations.

Particularly relevant to:

Company Ownership ≠ Carry Ownership

One Participant → Multiple Economic Interests

Current Ownership ≠ Expected Future Economic Opportunity

Private Equity Fund Compensation

Metrick, Andrew and Ayako Yasuda. “The Economics of Private Equity Funds.” Review of Financial Studies, Vol. 23, No. 6, 2010, pp. 2303–2341.

Relevant subjects include:

• carried-interest economics;
• management fees;
• GP compensation;
• economic value of carry;
• fund-level compensation structures;
• and the relationship between contractual carry arrangements and their economic value.

Particularly relevant to:

Carry Percentage ≠ Carry Value

Waterfall → Carry Pool Value

Cap Table → Participant Ownership

Economic Valuation of Carried Interest

Choi, Wonho Wilson, Andrew Metrick and Ayako Yasuda. “A Model of Private Equity Fund Compensation.” NBER Working Paper No. 17568, 2011.

Relevant subjects include:

• valuation of carried interest;
• GP compensation;
• contractual profit-sharing;
• timing of carry;
• expected value of carry;
• and sensitivity of carry value to underlying fund economics.

Particularly relevant to:

Carry Pool Value × Applicable Ownership → Participant Carry Position

Certain Percentage ≠ Certain Value

Calculated Unrealised Carry ≠ Guaranteed Future Distribution

Private Equity Compensation and Carry Participation

Heidrick & Struggles. 2021 North American Private Equity Investment Professional Compensation Survey. 2021.

Relevant subjects include:

• carried-interest participation by professional seniority;
• fund-based carry;
• deal-by-deal carry;
• vesting;
• participant capital contributions;
• clawback provisions;
• and differences in carry arrangements across professional levels.

Particularly relevant to:

One Participant ≠ Necessarily One Type of Carry Interest

Allocation Granularity → Cap-Table Granularity

Private Equity Operating Professional Carry

Heidrick & Struggles. 2019 North American Private Equity Operating Professional Compensation Survey. 2019.

Relevant subjects include:

• carried-interest participation by operating professionals;
• whole-fund versus deal-specific carry;
• carry points;
• carry value;
• vesting;
• co-investment;
• and non-cash compensation.

Particularly relevant to:

Carry Points ≠ Carry Value

Points → Percentage of Defined Pool → Relevant Carry Economics → Indicative Value

Fund-Level Carry Interest ≠ Deal-Level Carry Interest

Private Equity Compensation Market Practice

Private Equity Professional. 2025 Carried Interest & Compensation Survey. 2025.

Relevant subjects include:

• allocation of carry by fund size;
• carried-interest participation across partner and employee classes;
• salary, bonus and carry;
• differences in carry participation by seniority;
• compensation structures;
• and contemporary private equity compensation practices.

Particularly relevant to:

Participant Seniority ≠ Automatically Participant Carry Percentage

Carry Ownership Is a Separate Component of Participant Compensation

Employee Carry Pools — Primary-Source Example

Hamilton Lane Advisors, L.L.C. 2016 Carried Interest Plan. Effective 1 January 2016; amended and restated 14 February 2017.

Relevant subjects include:

• employee carry pools;
• allocation of a defined portion of fund carry to employees;
• employee eligibility;
• participant allocations;
• fund-specific carry economics;
• administration;
• forfeiture;
• and internal allocation of GP carry.

Particularly relevant to:

Fund Carry → Employee Carry Pool → Participant Allocation

Percentage of Employee Carry Pool ≠ Percentage of Total Fund Carry

Defined Carry Pool + Participant Ownership = Carry Cap Table

Employee Carry Pools and Annual Allocation — Primary-Source Example

Hamilton Lane Advisors, L.L.C. 2016 Carried Interest Plan. Amended and Restated, effective 1 January 2018.

Relevant subjects include:

• Employee Carry Pools;
• annual allocation of employee carry;
• allocation of a defined percentage of carried interest;
• participant eligibility;
• administration of participant interests;
• and separation between company-retained carry and employee carry.

Particularly relevant to:

Sponsor-Retained Carry ≠ Employee Carry Pool

One Carry Source → Defined Employee Carry Pools

Carry Pool = Defined Economic Population

Deal-by-Deal Compensation Architecture

Magro, João António. “Deal-by-Deal Compensation Structures and Portfolio Diversification.” Working Paper, 2019, revised 2026.

Relevant subjects include:

• deal-by-deal carried interest;
• compensation architecture;
• investment-specific incentives;
• portfolio construction;
• risk-taking;
• and behavioural effects of granular carry allocation.

Particularly relevant to:

Fund-Level Carry ≠ Deal-Level Participant Carry

Allocation Architecture → Participant Economic Exposure → Participant Incentives

One Fund ≠ Necessarily One Carry Cap Table

Carry Allocation Architecture and Employee Interests

Pittman, Tom and Robert Hagmeier. “Carried Interest Employee Incentive Structures.” In Mariya Stefanova (ed.), The Definitive Guide to Carried Interest. Private Equity International, 2017.

Relevant subjects include:

• carry points;
• fund-level allocations;
• vintage-level allocations;
• deal-level allocations;
• participant ownership;
• new participants;
• participant changes;
• forfeiture;
• reallocation;
• vesting;
• participant reporting;
• and administration of carry interests.

Particularly relevant to:

Participant + Carry Pool + Effective Period = Economic Interest

One Participant → Multiple Carry Pools → Multiple Cap-Table Positions

Current Carry Cap Table ≠ Historical Ownership Record

Carry as an Incentive Mechanism

Havers, Simon. “Carried Interest as an Incentive Mechanism: Advantages and Disadvantages.” In Mariya Stefanova (ed.), The Definitive Guide to Carried Interest. Private Equity International, 2017.

Relevant subjects include:

• individual carry allocations;
• carry as long-term compensation;
• fund-wide versus investment-specific economics;
• performance attribution;
• retention;
• participant incentives;
• and behavioural effects of carry structures.

Partnership and Incentive Theory

Jensen, Michael C. and William H. Meckling. “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.” Journal of Financial Economics, Vol. 3, No. 4, 1976, pp. 305–360.

Relevant subjects include:

• economic ownership;
• incentive alignment;
• managerial incentives;
• agency relationships;
• governance;
• and ownership structure.

Relevant to the broader conceptual relationship:

Economic Ownership → Economic Exposure → Incentives

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