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

First published: 24th of September 2026

Latest update: 5th of October 2026

Status: First Draft

1. Carry Ownership Exists Through Time

Parts V and VI established two fundamental ideas:

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

and:

Opening Ownership + Ownership Events = Closing Ownership

Part VII develops the time dimension further.

Private equity carry arrangements can remain economically relevant for ten, fifteen or even twenty years. During that period:

• funds are raised;
• investments are made;
• investments are realised;
• new funds are launched;
• participants join;
• participants are promoted;
• participants leave;
• carry allocations change;
• carry is distributed;
• unrealised carry develops;
• clawback exposure remains;
• and successive generations of professionals participate in different combinations of funds.

The result is not one static carry cap table.

It is a history of economic ownership.

The central principle is:

Carry ownership must be understood not only by participant and carry pool, but also by time.

Therefore:

Participant + Carry Pool + Effective Period = Economic Interest

2. The Time Dimension

Consider the statement:

Partner A owns 15% of Fund III carry.

This is incomplete if Partner A's ownership has changed.

A more complete statement is:

Partner A owned 10% from 1 January 2028, 15% from 1 January 2030 and 12% from 1 January 2033.

The economic position therefore requires three dimensions:

Who?

Of What?

When?

or:

Participant × Economic Population × Time

This is the basic dimensional structure of historical carry ownership.

3. Current Ownership Is Only One Point in Time

A current cap table answers:

Who owns the carry pool now?

That may be sufficient for some purposes.

But many carry calculations require a different question:

Who owned the relevant economics when the applicable economic event occurred?

Those questions can produce different answers.

Therefore:

Current Ownership ≠ Historical Ownership

and:

Current Cap Table ≠ Historical Economic Record

4. Why Historical Ownership Matters

Historical ownership can affect:

• realised carry allocations;
• unrealised carry allocations;
• distributions;
• clawback;
• forfeitures;
• leaver treatment;
• participant statements;
• tax reporting;
• accounting;
• disputes;
• audits;
• legal due diligence;
• and corrections.

The longer the life of the carry arrangement, the more important historical ownership becomes.

5. The Economic Timeline

A participant's carry position can be represented as an economic timeline.

For example:

1 Jan 2028 — Grant 5%

↓

1 Jan 2030 — Promotion to 10%

↓

1 Jan 2032 — Additional Grant to 15%

↓

1 Jul 2034 — Departure

↓

1 Jul 2034 onward — Retained Historical Interest 8%

The participant does not have one carry percentage.

The participant has a sequence of economic positions.

6. Ownership Periods

An ownership period is the interval during which a particular economic interest applies.

For example:

Each period represents a different ownership state.

Conceptually:

Ownership Event → New Ownership State → Effective Period

7. Continuous Economic History

The ownership periods should normally form a continuous history where the economics themselves are continuous.

For example:

5% until 31 December 2029

10% from 1 January 2030.

There should be no unexplained gap.

Likewise, there should not be unintended overlapping records showing both 5% and 10% for the same economic interest at the same time.

Therefore:

Historical Ownership = Ordered Sequence of Valid Economic States

8. Effective From and Effective To

Each historical state can be represented through:

Effective From

and:

Effective To

Alternatively, the system can record transactions and derive the periods.

Both approaches need to answer:

What ownership applied on any selected date?

For example:

Ownership(A, Fund III, 30 June 2031) = 10%

The time dimension should therefore be queryable, not merely descriptive.

9. Effective Date Is Economic Data

The effective date is not simply administrative metadata.

It can determine who receives carry.

Suppose:

Carry event = 31 December 2030

Participant A's interest changes:

10% → 15%

If the new percentage is effective:

1 January 2031,

the 2030 event may use 10%.

If effective:

1 January 2030,

the same event may use 15%.

Therefore:

Same Percentage Change + Different Effective Date = Potentially Different Carry Allocation

Effective dates are economic data.

Multiple Time Concepts

10. There Is More Than One Relevant Date

Carry administration frequently contains several dates for the same event.

For example:

Decision date;

approval date;

grant date;

legal execution date;

economic effective date;

vesting commencement date;

system-entry date;

distribution date;

and reporting date.

These dates should not be treated as interchangeable.

11. Decision Date

The decision date records when the relevant decision was made.

For example:

Compensation Committee approves Partner A's additional grant on:

15 March 2030.

This may be important for governance and audit.

But it does not necessarily determine when the economics begin.

12. Approval Date

The approval date may be the same as the decision date.

In more complex governance structures, different approvals may occur at different times.

For example:

Compensation Committee recommendation: 15 March

Board approval: 30 March

Legal execution: 15 April

Economic effective date: 1 January

The records should preserve the relevant chronology.

13. Grant Date

The grant date records when the interest is formally granted under the plan or legal documentation.

Again:

Grant Date ≠ Necessarily Economic Effective Date

A grant may be documented later but economically effective earlier, if properly authorised.

14. Economic Effective Date

The economic effective date determines when the participant's ownership changes for the relevant economic purpose.

This is generally the most important date for the historical cap table.

Conceptually:

Economic Effective Date → Ownership State Change

15. Vesting Commencement Date

The vesting commencement date determines when the vesting period begins.

It may precede or follow the economic effective date.

For example:

Vesting commencement: 1 January 2029

Economic participation: 1 January 2030

Grant approval: 15 March 2030

These are different dimensions.

Detailed vesting mechanics belong to Chapter 7.

16. System-Entry Date

The system-entry date records when the transaction was entered into the carry administration system.

Suppose:

Economic effective date: 1 January 2030

System entry: 15 April 2030

The system should not infer that the economics began on 15 April.

Therefore:

System-Entry Date ≠ Economic Effective Date

This distinction is particularly important for late entries and corrections.

17. Reporting Date

A cap table may be generated:

15 January 2031

showing ownership:

as at 31 December 2030.

Therefore:

Report Generation Date ≠ Cap Table Effective Date

Both may need to be preserved.

18. Date Hierarchy

A robust carry system therefore needs explicit date semantics.

For example:

Decision Date → Governance

Grant Date → Award Documentation

Economic Effective Date → Economic Ownership

Vesting Date → Vesting

System Date → Audit Trail

Reporting Date → Presentation

The dates answer different questions.

Fund Vintages

19. Private Equity Firms Exist Across Fund Generations

A private equity firm rarely manages only one fund.

At a particular moment it may simultaneously have:

Fund I — largely realised;

Fund II — mature;

Fund III — harvesting;

Fund IV — investing;

Fund V — fundraising.

Participants may have different economic interests in every fund.

Therefore:

One Participant ≠ One Carry Percentage Across Fund Generations

20. Fund Vintage

A fund vintage commonly identifies the period associated with the fund's commencement or investment activity according to the relevant convention.

For carry-plan purposes, however, the important point is that each fund represents a distinct economic population unless the plan provides otherwise.

For example:

This table describes succession through fund generations.

21. Carry Ownership Across Vintages

A participant may therefore hold a portfolio of vintage-specific interests.

Conceptually:

Participant Carry Portfolio = Σ Carry Interests Across Relevant Fund Vintages

Each fund interest can have its own:

• percentage;
• points;
• effective date;
• vesting;
• leaver treatment;
• realised carry;
• unrealised carry;
• clawback;
• and legal vehicle.

The participant's total carry position is the combination of these separate interests.

22. Historical Funds Do Not Automatically Follow Current Seniority

Suppose Partner B is promoted to Managing Partner in 2032.

That does not mean B's ownership in Fund II, raised years earlier, automatically changes.

B might hold:

Fund II = 5%

Fund III = 10%

Fund IV = 20%

Fund V = 30%

The current title tells us little about historical fund ownership.

Therefore:

Current Seniority ≠ Historical Carry Ownership

23. Fund Generations as a Succession Mechanism

Successive funds provide a natural mechanism for changing ownership without rewriting historical economics.

For example:

Founder A:

Fund III = 35%

Fund IV = 25%

Fund V = 15%

Partner B:

Fund III = 10%

Fund IV = 20%

Fund V = 30%

Founder A retains historical economics.

Partner B receives increasing future economics.

This produces:

Historical Value Preservation + Future Economic Transition

24. Gradual Economic Transition

Succession does not need to occur in one transaction.

It can occur progressively through successive fund vintages.

For example:

Generation 1 → Older Funds

Generation 1 + Generation 2 → Transitional Funds

Generation 2 → Newer Funds

This can align ownership with evolving responsibility while respecting historical contribution.

25. Overlapping Fund Lives

Fund vintages overlap.

Fund III may still contain unrealised investments when Fund IV and Fund V have already been raised.

Therefore a participant may simultaneously have:

historical carry in Fund III;

current carry in Fund IV;

future-oriented carry in Fund V.

The participant's economics cannot be understood from the newest fund alone.

26. Economic Age Versus Calendar Age

Two funds raised in different years can also be at very different economic stages.

For example:

Fund III may already have generated substantial carry.

Fund IV may have little unrealised carry.

Fund V may not yet have invested.

Therefore:

Fund Vintage ≠ Economic Maturity

When comparing carry interests across funds, both dimensions matter.

Vintage-Level Carry Pools

27. Vintage-Level Allocation Within a Fund

Part III introduced vintage-level participant allocation.

A fund itself may contain different internal allocation vintages.

For example:

2028 investment vintage;

2029 investment vintage;

2030 investment vintage.

Participant interests may differ by vintage.

This creates another time dimension inside the same fund.

28. Fund Vintage Versus Allocation Vintage

These concepts should not be confused.

Fund Vintage

identifies the fund generation.

Allocation Vintage

identifies an internal economic population used by the carry plan.

For example:

Fund IV may be a 2028 fund.

Within Fund IV, participant allocation might contain:

2028 Allocation Vintage;

2029 Allocation Vintage;

2030 Allocation Vintage.

Therefore:

Fund Vintage ≠ Necessarily Carry Allocation Vintage

29. Example of Vintage-Level Allocation

Suppose Fund IV has three allocation vintages.

Partner A owns:

2028 = 20%

2029 = 15%

2030 = 10%

Partner B owns:

2028 = 10%

2029 = 15%

2030 = 20%

The participant's interest changes with the economic population.

A statement that both partners own “15% of Fund IV carry” would obscure the actual architecture.

30. Why Vintage-Level Allocation Exists

Vintage-level allocation can be used to reflect:

• changes in team composition;
• promotions;
• new joiners;
• departures;
• changes in responsibility;
• succession;
• or changes in investment contribution over time.

It can provide more temporal precision than one fixed fund-level cap table.

But it also creates more economic populations to administer.

Therefore:

Greater Temporal Precision → Greater Administrative Complexity

Time and Investment-Level Allocation

31. Investment-Level Carry Has Its Own Time Dimension

In an investment-level architecture, participants may have different interests in different investments.

Those investments are also made at different times.

Suppose:

Investment A — acquired 2028

Investment B — acquired 2030

Investment C — acquired 2032

Partner D joins in 2031.

The plan might provide:

Investment A = 0%

Investment B = 0%

Investment C = 10%

The participant's economic participation follows the relevant investment population rather than a generic fund date.

32. Join Date Versus Investment Date

A new participant may be excluded from investments made before joining.

Conceptually:

Investment Date < Participant Effective Date → No Participation

Investment Date ≥ Participant Effective Date → Participation

But this is only one possible rule.

A plan might instead include the participant in unrealised existing investments or apply another methodology.

The important point is that the temporal rule must be defined.

33. Exit Date Is a Different Concept

Suppose a participant joins after an investment is made but before it is sold.

Should the participant share in its carry?

Possible answers include:

• no, because the investment predates the participant;
• yes, because the participant contributed to value creation before exit;
• partially, based on service period;
• yes, from a defined opening value;
• or according to another rule.

Therefore:

Investment Date Alone ≠ Necessarily Participant Attribution Rule

The allocation architecture and carry plan determine the result.

Historical Ownership and Carry Generation

34. Which Ownership Percentage Applies?

One of the most important questions in participant carry allocation is:

Which historical ownership percentage should be applied to which carry?

Suppose Partner A owns:

2028–2029: 5%

2030–2031: 10%

2032 onward: 15%

The fund generates carry over all three periods.

Which percentage applies?

There is no universal answer.

The plan must define the relationship between:

Carry Generation

and:

Ownership Through Time

35. Distribution-Date Ownership

One possible approach is to use ownership at the distribution date.

Suppose:

Carry distribution on 1 July 2032 = €10m

Partner A owns 15% on that date.

Allocation:

€10m × 15% = €1.5m

This is administratively simple.

But it may allocate economics generated over many earlier years using only the current ownership.

36. Realisation-Date Ownership

Another approach is to use ownership when the underlying carry becomes realised.

Suppose Investment X is sold on 1 March 2031.

Partner A owns 10% at that date.

Carry attributable to the event:

€10m

Participant allocation:

€10m × 10% = €1m

A later promotion does not change the allocation.

This preserves the ownership applicable when the economic event crystallised.

37. Investment-Date Ownership

Another approach is to use ownership when the relevant investment was made.

Suppose Investment X was acquired in 2028 when A owned 5%.

It is sold in 2032 when A owns 15%.

If investment-date ownership applies:

€10m × 5% = €0.5m

This produces a very different result from distribution-date ownership.

38. Periodic Ownership

A more granular approach may allocate carry according to ownership during different periods.

For example:

Value created 2028–2029 → 5%

Value created 2030–2031 → 10%

Value created from 2032 → 15%

This requires a method for attributing carry or value creation through time.

That can be considerably more complex.

39. Historical-Value Segmentation

Part VI introduced historical embedded value.

Time-based ownership can be implemented by dividing economics into segments.

For example:

Carry value at 31 December 2029 = €10m

Carry value at 31 December 2031 = €20m

Final carry = €30m

Partner A ownership:

first €10m = 5%

next €10m = 10%

final €10m = 15%

Participant allocation:

€10m × 5% = €0.5m

€10m × 10% = €1.0m

€10m × 15% = €1.5m

Total:

€3.0m

This creates explicit historical economic layers.

40. Time Segmentation Is an Allocation Rule

Such segmentation should not be assumed merely because historical cap tables exist.

Historical cap tables tell us who owned what at different dates.

They do not tell us how changes in fund value should be attributed between those dates.

Therefore:

Historical Ownership Data ≠ Historical Value Attribution Method

Both are required if the plan uses time-segmented economics.

Realised and Unrealised Carry Through Time

41. Realised Carry Has History

Suppose a participant receives carry distributions while owning 10%.

The participant is later promoted to 20%.

The historical distributions do not automatically become 20%.

Therefore:

Current Ownership Change ≠ Automatic Recalculation of Historical Realised Carry

unless the plan specifically requires retroactive treatment.

42. Unrealised Carry Can Change With Ownership

Unrealised carry may be different.

Suppose a participant's future interest increases from 10% to 20%.

Depending on the plan, the additional interest may apply to:

• all existing unrealised carry;
• only future increases;
• only new investments;
• or another economic population.

Therefore:

Change in Current Ownership ≠ Automatic Definition of Unrealised Carry Treatment

The plan must specify the historical-value rule.

43. Realised Versus Unrealised Ownership Populations

A participant can therefore simultaneously have:

10% historical realised carry interest;

15% existing unrealised carry interest;

20% future carry interest.

These percentages are not necessarily contradictory.

They apply to different economic populations.

Therefore:

One Participant + One Fund ≠ Necessarily One Relevant Carry Percentage

44. Historical Carry Layers

A useful conceptual model is to treat carry economics as layers.

For example:

Layer 1 — Realised Historical Carry

Layer 2 — Existing Unrealised Carry

Layer 3 — Future Value Creation

Different ownership percentages may apply to each layer.

This is particularly useful for:

• promotions;
• new joiners;
• departures;
• succession;
• and restructurings.

New Joiners Across Time

45. New Joiners and Fund Generations

Suppose Partner D joins in 2032.

The firm manages:

Fund II — substantially realised

Fund III — harvesting

Fund IV — investing

Fund V — fundraising

D might receive:

Fund II = 0%

Fund III = 5%

Fund IV = 10%

Fund V = 15%

The economic package therefore recognises the different maturity of the funds.

46. Same Percentage Can Represent Different Value

Suppose D instead receives 10% in each fund.

Current indicative carry values:

Fund II = €30m

Fund III = €20m

Fund IV = €5m

Fund V = €0m

A 10% interest would correspond to current indicative amounts of:

Fund II = €3m

Fund III = €2m

Fund IV = €0.5m

Fund V = €0m

Therefore:

Same Percentage Across Vintages ≠ Same Economic Grant

47. Future Funds Can Carry Significant Incentive Value

A new fund may currently have no carry value.

But a meaningful carry allocation in that fund can still represent substantial future opportunity.

Therefore:

Current Carry Value = €0 ≠ Carry Interest Has No Incentive Value

The participant's expectation of future economics matters even when current calculated carry is zero.

48. Existing Value Versus Future Opportunity

This creates a fundamental new-joiner trade-off:

Existing Fund Carry → More Immediate Economic Value

versus:

Future Fund Carry → Greater Dependence on Future Performance

A compensation package may combine both.

For example:

small participation in mature funds;

larger participation in current fund;

full target participation in future funds.

Promotions Through Time

49. Promotion Does Not Need to Rewrite History

Suppose A is promoted in 2032.

Rather than increasing A's ownership retrospectively in every existing fund, the firm can change only future economics.

For example:

Fund II = unchanged 5%

Fund III = unchanged 10%

Fund IV = increase from 10% to 15% prospectively

Fund V = 20%

Future Fund VI = target 25%

This preserves historical ownership while recognising the new role.

50. Promotion Effective During a Fund Life

Where ownership changes during the life of a fund, the plan needs to define how the change applies.

Possible approaches include:

• full immediate participation;
• prospective value participation;
• future investment participation;
• next allocation vintage;
• next fund only;
• or another defined methodology.

Therefore:

Promotion Date → Does Not by Itself Define Economic Treatment

Departures Through Time

51. Departure Creates a Temporal Boundary

A participant departure creates another important date.

Before departure:

the participant may actively participate in current and future economics.

After departure:

some interests may continue and others may cease.

Conceptually:

Pre-Departure Economics → Leaver Rules → Post-Departure Economics

Chapter 7 determines the vesting and leaver treatment.

Chapter 6 records the resulting ownership through time.

52. Historical Ownership Does Not Disappear

Suppose a participant leaves in 2032.

The participant owned 10% during 2028–2032.

Even if future ownership becomes zero, the historical record should remain.

Therefore:

Future Ownership = 0% ≠ Historical Ownership = 0%

Deleting the participant from the cap table would destroy economically relevant history.

53. Former Participants Remain Economically Relevant

Former participants may continue to have:

• vested carry;
• unrealised carry;
• unpaid realised carry;
• escrow balances;
• clawback obligations;
• tax obligations;
• or reporting rights.

Therefore:

Employment Status = Former ≠ Economic Status = Inactive

Carry administration may continue for many years after employment ends.

54. Active and Economic Status

It can therefore be useful to distinguish:

Employment Status

from:

Carry Status

For example:

Employment status: Former Employee

Carry status: Active Historical Participant

or:

Employment status: Active

Carry status: No Interest in Fund II

The two dimensions answer different questions.

Historical Clawback Responsibility

55. Clawback Has Its Own Historical Population

Suppose a participant receives carry while owning 20%.

The participant later reduces ownership to 10%.

If the fund subsequently suffers a clawback, responsibility may relate to the historical carry received rather than the current 10% ownership.

Therefore:

Current Carry Ownership ≠ Necessarily Historical Clawback Responsibility

This is a particularly important reason to preserve historical participant economics.

56. Carry Received Versus Current Ownership

Suppose:

A received €2m historically.

B received €1m historically.

Current ownership:

A = 10%

B = 30%.

A later clawback obligation should not automatically be allocated 10:30 merely because those are the current percentages.

The relevant basis may instead relate to historical distributions or contractual responsibility.

Therefore:

Current Cap Table ≠ Clawback Allocation Table

57. Historical Responsibility Survives Ownership Changes

Transfers, promotions and departures do not necessarily transfer historical clawback obligations.

A participant could therefore have:

0% future carry ownership;

€2m historical carry received;

continuing clawback exposure.

This is economically coherent.

Different percentages and balances relate to different populations.

Overlapping Fund Generations

58. The Multi-Fund Participant

Consider a partner who has worked at the firm for fifteen years.

The partner may have interests in:

Fund I;

Fund II;

Fund III;

Fund IV;

Fund V;

co-investment carry;

strategy carry;

deal-specific pools;

and leadership carry.

Each may have a different history.

The participant is therefore better represented as a portfolio of economic interests than as a single carry percentage.

59. Participant Carry Matrix

A useful representation is a participant carry matrix.

This shows ownership across fund generations.

But it remains only a snapshot if the percentages themselves have changed through time.

60. Adding Time to the Matrix

The full data structure is therefore not merely:

Participant × Fund

but:

Participant × Fund × Carry Pool × Effective Period

If investment-level allocation exists:

Participant × Fund × Investment × Carry Pool × Effective Period

If classes exist:

Participant × Fund × Investment × Carry Pool × Class × Effective Period

The dimensionality can grow quickly.

61. Complexity Is Multiplicative

Suppose a manager has:

8 funds;

15 investments per fund;

3 carry pools;

40 participants;

multiple ownership periods.

The potential number of economic relationships becomes substantial.

This explains why carry administration can become complex even where every individual calculation is simple.

Therefore:

Simple Percentage × Many Dimensions × Many Years = Complex Carry Administration

Historical Reconstruction

62. The Need for Reconstruction

Many organisations did not begin with a sophisticated carry administration system.

Historical ownership may instead exist across:

• spreadsheets;
• legal agreements;
• emails;
• board minutes;
• participant statements;
• payroll records;
• distribution files;
• tax records;
• and personal records maintained by partners.

When implementing a controlled carry system, this history may need to be reconstructed.

63. Start With the Economic Populations

Historical reconstruction should first identify:

• funds;
• carry plans;
• carry pools;
• classes;
• investment-specific pools;
• vintage pools;
• and legal vehicles.

Only then should participant ownership be reconstructed.

Otherwise percentages may be assigned without knowing their correct denominator.

Therefore:

Define Historical Economic Population Before Reconstructing Historical Ownership

64. Reconstruct the Opening Position

For each pool, establish the earliest reliable ownership state.

For example:

Fund III Employee Carry Pool

Opening date: 1 January 2028

A = 30%

B = 25%

C = 20%

Reserve = 25%

This becomes the starting state.

65. Reconstruct Ownership Events

Next identify all subsequent changes:

1 July 2028 — C +5%

1 January 2029 — D joins +10%

1 July 2030 — A transfers 5% to B

1 January 2031 — pool expands

1 June 2032 — C leaves

Each event should be supported where possible by contemporaneous evidence.

66. Reconstruct Closing States

After each transaction:

Opening State + Transaction = Closing State

The closing state then becomes the next opening state.

This produces a continuous economic history.

Any unexplained break indicates missing information or an error.

67. Use Distributions as Corroborating Evidence

Historical distribution records can help test the reconstructed ownership.

Suppose reconstructed ownership indicates:

A = 20%

but a historical distribution allocated A 30%.

Possible explanations include:

• reconstruction is wrong;
• distribution was wrong;
• different ownership rule applied;
• vesting affected the payment;
• another carry pool was involved;
• or another adjustment existed.

The distribution should not automatically override the ownership record.

It provides evidence requiring explanation.

68. Use Participant Statements as Evidence

Participant statements can similarly help reconstruct history.

But they may themselves contain errors.

Therefore:

Participant Statement = Evidence

not necessarily:

Participant Statement = Definitive Economic Truth

The governing arrangements and properly authorised ownership records remain fundamental.

69. Conflicting Historical Records

Suppose:

Legal document says 10%.

Cap-table spreadsheet says 15%.

Participant statement says 15%.

Distribution history suggests 12%.

The correct answer cannot be determined merely by choosing the most common number.

The discrepancy requires investigation.

A historical reconstruction should document:

• evidence;
• conflicts;
• interpretation;
• decision;
• approval;
• and resulting corrected position.

70. Historical Uncertainty

Sometimes the evidence does not permit complete certainty.

The system should then record that limitation rather than create false precision.

For example:

Ownership before 1 January 2019 reconstructed from available historical records; original approval documentation incomplete.

This is preferable to presenting an unsupported number as unquestionable fact.

Therefore:

Known Uncertainty > False Precision

Corrections Through Time

71. Discovery Date Versus Economic Date

Suppose an error made in 2028 is discovered in 2032.

The system should preserve:

Economic effective date of correction:

1 January 2028

Discovery date:

15 March 2032

Correction-entry date:

20 March 2032

This allows both the corrected economics and audit history to coexist.

72. Corrected Historical Ownership

After correction, a historical query may show:

A owned 15% on 31 December 2028.

But the audit history may show that the organisation originally reported 10%.

Both pieces of information are relevant.

Therefore:

Correct Economic History ≠ Original Reporting History

73. As-Was Versus As-Corrected Reporting

A sophisticated system may therefore support two historical views.

As-Corrected

What the organisation now believes the correct historical economics were.

As-Was

What the system or participant statement actually reported at the historical date.

These views answer different questions.

74. Why Both Views Matter

Suppose litigation arises over a 2029 distribution.

The question may be:

What should the participant have received under the correct economics?

That requires as-corrected data.

Another question may be:

What information was actually provided to the participant in 2029?

That requires as-was reporting history.

Therefore:

Economic History ≠ Reporting History

Both may need preservation.

Historical Ownership and Data Architecture

75. Do Not Store Only Current State

A system containing only:

Participant A = 15%

cannot answer:

What did A own in 2029?

Therefore current-state-only data is insufficient for historical carry administration.

At minimum, the system requires:

• effective-dated states;
• ownership transactions;
• or both.

76. Transaction-Based History

A transaction-based model records:

Opening grant +5%

Promotion +5%

Additional grant +5%

Departure −7%

Closing = 8%

The historical state at any date can then be derived from transactions effective up to that date.

Conceptually:

Ownership at Date T = Opening Ownership + Σ Ownership Transactions Effective on or Before T

77. Effective-Dated State History

Alternatively, the system can store:

1 Jan 2028–31 Dec 2029 = 5%

1 Jan 2030–31 Dec 2031 = 10%

1 Jan 2032–30 Jun 2034 = 15%

1 Jul 2034 onward = 8%

This directly answers historical ownership queries.

But the reason for each change may need a separate transaction record.

78. Combining Transactions and States

A strong architecture can use transactions as the primary economic record and derive effective-dated states.

Therefore:

Ownership Transactions → Historical Ownership States → Cap Table at Selected Date

This provides both explanation and usability.

79. Bitemporal Thinking

Complex historical administration can involve two different concepts of time:

1. When the economics were effective
2. When the organisation knew or recorded them

Suppose a correction entered in 2032 changes ownership effective from 2029.

Economic time:

2029

Knowledge / record time:

2032

This distinction is valuable for auditability.

80. Economic Time Versus Record Time

The two timelines can be expressed:

Economic Effective Date → When the Ownership Applies

Record Date → When the Information Entered the Controlled Record

These should not be confused.

A late-recorded transaction may still be economically effective earlier.

81. Why This Matters

Without both concepts, a historical correction can create an apparent paradox.

A report rerun today for 2029 may show 15%.

But the report actually issued in 2029 showed 10%.

Both can be true:

2029 Corrected Economic Ownership = 15%

2029 Originally Reported Ownership = 10%

The system should be capable of explaining the difference.

Time and Participant Reporting

82. Participant Statements Need a Period

A participant statement should specify the period or date it covers.

For example:

Carry Statement as at 31 December 2032

or:

Carry Activity for the Year Ended 31 December 2032

These are different reports.

One is a state.

The other is a movement report.

83. Opening-to-Closing Participant Statement

A useful annual statement can show:

Opening points;

grants;

transfers;

forfeitures;

other adjustments;

closing points.

For example:

This explains the ownership change through the year.

84. Multi-Vintage Participant Statement

A participant statement may also show:

This provides a more complete view of the participant's carry portfolio.

Any unrealised values should remain clearly identified as indicative rather than guaranteed.

85. Historical Statements Should Be Reproducible

Where possible, the organisation should be able to reproduce:

• the current statement;
• prior statements as originally issued;
• and corrected historical statements where necessary.

This supports transparency, auditability and dispute resolution.

Time and Carry Allocation

86. Ownership History Is an Input, Not the Final Calculation

Historical ownership data alone does not determine participant carry.

The calculation also requires the plan's allocation rule.

Conceptually:

Carry Pool Economics + Historical Ownership + Allocation Rule = Participant Carry Allocation

This is the bridge to Part VIII.

87. The Temporal Allocation Rule

The plan should determine how ownership through time interacts with carry economics.

Possible approaches include:

• current ownership;
• distribution-date ownership;
• realisation-date ownership;
• investment-date ownership;
• vintage ownership;
• value-layer ownership;
• or another defined methodology.

The correct rule is contractual.

There is no universal default that should be assumed.

88. Same Ownership History, Different Allocation Rule

Consider the same participant history:

2028–2029 = 5%

2030–2031 = 10%

2032 onward = 15%

Final carry pool = €30m.

Under a simple final-date method:

€30m × 15% = €4.5m

Under the historical layering example:

First €10m × 5% = €0.5m

Second €10m × 10% = €1.0m

Third €10m × 15% = €1.5m

Total:

€3.0m

Same ownership history.

Different allocation methodology.

Different result.

Therefore:

Historical Ownership ≠ Participant Allocation Rule

89. Same Rule, Different History

Conversely, the same allocation rule applied to different ownership histories produces different results.

This means both dimensions must be controlled:

Correct Ownership History + Correct Allocation Rule = Correct Participant Allocation

If either is wrong, the result can be wrong even if the arithmetic is flawless.

Worked Case — Three Generations of Carry Ownership

90. Fund Structure

Assume a private equity firm has three active funds.

Fund III

Current carry pool: €30m

Fund IV

Current carry pool: €15m

Fund V

Current carry pool: €0m

The firm has three generations of senior participants:

Founder A;

Partner B;

Partner C.

91. Historical Ownership

The fully diluted participant interests are:

The structure shows a clear generational transition.

92. Current Indicative Carry

Ignoring vesting and other adjustments:

Founder A

Fund III:

€30m × 40% = €12m

Fund IV:

€15m × 25% = €3.75m

Fund V:

€0

Total current indicative carry:

€15.75m

Partner B

Fund III:

€30m × 20% = €6m

Fund IV:

€15m × 30% = €4.5m

Total:

€10.5m

Partner C

Fund III:

€30m × 10% = €3m

Fund IV:

€15m × 20% = €3m

Total:

€6m

93. Future Incentive Position

The current values tell only part of the story.

Fund V currently has no carry value.

But future ownership is:

Founder A = 15%

Partner B = 35%

Partner C = 30%

The firm's future economic leadership has shifted materially toward B and C.

Therefore:

Current Carry Value ≠ Future Economic Position

This is why succession should be analysed across fund generations rather than only through current carry value.

94. Partner D Joins

Assume Partner D joins while Fund IV is still active and Fund V is beginning investment.

The firm grants:

Fund III = 0%

Fund IV = 5%

Fund V = 15%

The Fund IV grant is prospective only from the join date.

The Fund V grant participates fully.

D therefore has different temporal rules across the two funds.

95. Fund IV Historical Value

Assume Fund IV carry is €15 million when D joins.

The plan excludes D from that historical embedded value.

Fund IV later increases to €25 million.

Increment:

€25m − €15m = €10m

D's prospective 5% interest produces:

€10m × 5% = €0.5m

D does not receive:

€25m × 5% = €1.25m

because the first €15 million is outside D's economic participation period.

96. Fund V Economics

Fund V had no carry when D joined.

D receives 15% from inception of D's relevant participation.

If Fund V later generates €20 million carry:

€20m × 15% = €3m

D's two carry interests therefore have different historical-value treatment even though both belong to the same participant.

97. Participant-Level Result

D's indicative position becomes:

Fund IV = €0.5m

Fund V = €3m

Total:

€3.5m

But this total should not erase the underlying economic populations.

The system should preserve:

Fund IV Prospective Interest

and:

Fund V Full Interest

separately.

Worked Case — Historical Ownership Change

98. Ownership Timeline

Assume Fund VI participant A has:

2028–2029 = 10%

2030–2031 = 15%

2032 onward = 20%

Carry values at the relevant transition dates are:

31 Dec 2029 = €10m

31 Dec 2031 = €25m

Final carry = €40m

Assume the plan protects the economics accumulated before each ownership increase.

99. Layer One

First €10 million:

A owns 10%.

Allocation:

€10m × 10% = €1m

100. Layer Two

Carry increases:

€10m → €25m

Increase:

€15m

A owns 15%.

Allocation:

€15m × 15% = €2.25m

Cumulative:

€3.25m

101. Layer Three

Carry increases:

€25m → €40m

Increase:

€15m

A owns 20%.

Allocation:

€15m × 20% = €3m

Total:

€1m + €2.25m + €3m = €6.25m

102. Current-Percentage Comparison

If the final 20% were applied to the entire €40 million:

€40m × 20% = €8m

Difference:

€8m − €6.25m = €1.75m

The €1.75 million difference represents historical value that would be transferred to A by applying current ownership retrospectively.

This demonstrates why the temporal rule matters.

103. Falling Carry Value

Now suppose carry does not rise monotonically.

Values:

2029 = €10m

2031 = €25m

2032 = €15m

2034 = €30m

A's ownership increases over the same period.

A simple layering approach now raises harder questions.

Does the €10 million decline reduce:

• A's latest layer first;
• all layers proportionately;
• historical layers;
• or some other population?

When value subsequently recovers, which ownership percentage applies to the recovery?

These questions cannot be answered from the cap table alone.

104. Time-Based Allocation Is Not Necessarily Linear

The previous example demonstrates an important limitation.

Fund carry can rise, fall and rise again.

Therefore:

Change in Carry Value Through Time ≠ Automatically New Carry Attributable to Current Owners

A plan using historical-value protection needs rules for:

• losses;
• reversals;
• recoveries;
• realised carry;
• unrealised carry;
• and possibly high-water marks.

This is why participant allocation methodology deserves separate treatment in Part VIII.

Data and Control

105. Minimum Historical Ownership Data

A robust historical ownership record should normally identify:

• participant;
• carry plan;
• carry pool;
• class;
• points or units;
• percentage;
• economic effective date;
• end date where relevant;
• transaction source;
• transaction type;
• approval;
• supporting documentation;
• and record-entry information.

More complex architectures may require additional dimensions.

106. Historical Query Capability

The system should be able to answer questions such as:

Who owned Fund III Employee Carry on 31 December 2029?

What percentage did Partner A own when Investment X was realised?

What interests did Partner B hold when they left?

Which Fund IV economics were granted after Partner C joined?

What historical carry distributions remain subject to Partner D's clawback?

These are temporal questions.

A current cap table cannot answer them reliably.

107. Reconciliation Across Time

Historical ownership should reconcile from one state to the next.

For every pool:

Opening State + Effective Transactions = Closing State

For every participant:

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

For every denominator:

Opening Pool + Expansion − Contraction = Closing Pool

These reconciliations should operate across every reporting period.

108. Gap Detection

Suppose A's records show:

1 Jan 2028–31 Dec 2029 = 10%

1 Feb 2030 onward = 15%

What happened during January 2030?

The gap may be legitimate.

But it requires explanation.

Historical systems should detect unexplained gaps.

109. Overlap Detection

Suppose records show:

1 Jan 2028–30 Jun 2030 = 10%

1 Jan 2030 onward = 15%

Between January and June 2030 both states are active.

If the records represent the same economic interest, this is likely an error.

Therefore systems should also detect unintended overlaps.

110. Duplicate Economic Periods

Two records may also describe the same participant, pool, class and period.

If both are counted, ownership may be duplicated.

A historical carry system should therefore control uniqueness at the appropriate economic level.

111. Time-Zone Precision Is Usually Not the Economic Problem

Carry ownership generally changes by economic date rather than by second-by-second transaction timestamp.

The system may still preserve timestamps for audit purposes.

But economic precision should reflect the governing rules.

Artificial technical precision should not replace economic interpretation.

Therefore:

Greater Timestamp Precision ≠ Greater Economic Accuracy

Time and Legal Ownership

112. Legal Effective Date Versus Economic Effective Date

A legal transfer may be executed after the intended economic transfer date.

For example:

Economic effective date: 1 January

Legal documentation completed: 1 March

Whether that treatment is valid depends on the relevant documents and law.

From an economic administration perspective, the two dates should be preserved separately rather than silently treated as identical.

113. Legal Vehicle Changes Through Time

A participant might hold the same economic interest through several legal structures over time.

For example:

2028–2030 → Vehicle A

2030–2033 → Vehicle B

2033 onward → Vehicle C

If the economics remain unchanged:

Legal Ownership History Changes

while:

Economic Ownership History Remains Continuous

The system should be capable of representing both.

114. Economic Continuity Across Legal Migration

Suppose A owns 10% before and after a vehicle migration.

The economic history should show continuous 10% ownership.

The legal history should show:

Vehicle A → Vehicle B.

Therefore:

Legal Discontinuity ≠ Necessarily Economic Discontinuity

This prevents legal restructuring from artificially resetting economic history.

Time and Organisational History

115. People Change Faster Than Funds

A fund may exist for fifteen years.

During that period:

• investment professionals change;
• partners retire;
• new partners join;
• teams reorganise;
• offices open and close;
• strategies evolve;
• legal entities change;
• and administration systems are replaced.

The fund remains.

Its carry history must survive these organisational changes.

116. Carry Data Outlives Employment Data

HR systems may archive or remove former employees.

Carry systems often cannot.

A former employee may remain economically relevant for another decade.

Therefore:

Employee Master Data Lifecycle ≠ Carry Participant Data Lifecycle

Carry records require their own retention logic.

117. Carry Data Outlives Systems

The system used when a fund is launched may no longer exist when the final carry is distributed.

Historical carry data therefore needs to survive system migrations.

This reinforces the importance of:

• clear economic definitions;
• controlled identifiers;
• transaction history;
• effective dates;
• documentation;
• and reproducible calculations.

The Historical Carry Ledger

118. From Cap Table to Historical Carry Ledger

Part V introduced the ownership ledger.

The time dimension expands this into a broader historical carry ledger.

The ledger should allow reconstruction of:

Participant

↓

Carry Pool

↓

Ownership Transactions

↓

Ownership Through Time

↓

Participant Allocations

↓

Carry Distributions

↓

Remaining Economic Position

This creates continuity across the life of the carry arrangement.

119. Economic State at Any Date

The objective is to be able to reconstruct the economic state at any relevant date.

For example:

Economic State at 31 December 2030

might include:

• carry pool value;
• participant ownership;
• realised carry;
• unrealised carry;
• distributions;
• reserve;
• vesting;
• and historical obligations.

This enables reproducibility.

120. Reproducibility

A controlled carry system should aim for:

Same Historical Data + Same Historical Rules = Same Historical Result

This means that a calculation rerun years later should reproduce the correct historical economic outcome, subject to properly documented corrections.

Reproducibility is fundamental to defensibility.

Relationship With Part VIII

121. Ownership Is Now Defined

Parts III through VII have progressively established:

Allocation Architecture

↓

Carry Pools

↓

Points, Units and Economic Interests

↓

Carry Cap Tables

↓

Ownership Changes

↓

Ownership Through Time

We now know:

• which economic population exists;
• who participates;
• what they own;
• and when they own it.

The next question is:

How do we translate the carry generated by the fund into the amount attributable to each participant?

That is the purpose of Part VIII.

122. From Historical Ownership to Participant Allocation

The next step can be expressed:

Carry Generated

↓

Relevant Carry Pool

↓

Applicable Economic Population

↓

Applicable Historical Ownership

↓

Participant Allocation Rule

↓

Participant Carry Allocation

The cap table supplies the ownership.

The historical ledger supplies the time dimension.

The plan supplies the allocation rule.

The fund waterfall supplies the carry.

Only when these components are combined can participant carry be calculated correctly.

123. Core Principles

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

Carry Ownership Must Be Understood by Participant, Economic Population and Time

Participant + Carry Pool + Effective Period = Economic Interest

Participant × Economic Population × Time = Historical Carry Ownership

Current Ownership ≠ Historical Ownership

Current Cap Table ≠ Historical Economic Record

Ownership Event → New Ownership State → Effective Period

Historical Ownership = Ordered Sequence of Valid Economic States

Effective Date Is Economic Data

Same Percentage Change + Different Effective Date = Potentially Different Carry Allocation

Decision Date ≠ Grant Date ≠ Economic Effective Date ≠ Vesting Date ≠ System-Entry Date ≠ Reporting Date

Economic Effective Date → Ownership State Change

System-Entry Date ≠ Economic Effective Date

Report Generation Date ≠ Cap Table Effective Date

One Participant ≠ One Carry Percentage Across Fund Generations

Participant Carry Portfolio = Σ Carry Interests Across Relevant Fund Vintages

Current Seniority ≠ Historical Carry Ownership

Historical Value Preservation + Future Economic Transition

Fund Vintage ≠ Economic Maturity

Fund Vintage ≠ Necessarily Carry Allocation Vintage

Greater Temporal Precision → Greater Administrative Complexity

Investment Date Alone ≠ Necessarily Participant Attribution Rule

Carry Generation + Ownership Through Time → Requires Defined Allocation Rule

Historical Ownership Data ≠ Historical Value Attribution Method

Current Ownership Change ≠ Automatic Recalculation of Historical Realised Carry

Change in Current Ownership ≠ Automatic Definition of Unrealised Carry Treatment

One Participant + One Fund ≠ Necessarily One Relevant Carry Percentage

Historical Carry Layer 1 → Historical Ownership Population

Historical Carry Layer 2 → Subsequent Ownership Population

Future Value Creation → Current/Future Ownership Population

Same Percentage Across Vintages ≠ Same Economic Grant

Current Carry Value = €0 ≠ Carry Interest Has No Incentive Value

Promotion Date ≠ Complete Economic Treatment

Future Ownership = 0% ≠ Historical Ownership = 0%

Employment Status = Former ≠ Economic Status = Inactive

Current Carry Ownership ≠ Necessarily Historical Clawback Responsibility

Current Cap Table ≠ Clawback Allocation Table

Participant × Fund × Carry Pool × Effective Period = Multi-Fund Historical Ownership

Simple Percentage × Many Dimensions × Many Years = Complex Carry Administration

Define Historical Economic Population Before Reconstructing Historical Ownership

Opening State + Transaction = Closing State

Participant Statement = Evidence, Not Necessarily Definitive Economic Truth

Known Uncertainty > False Precision

Correct Economic History ≠ Original Reporting History

Economic History ≠ Reporting History

Ownership at Date T = Opening Ownership + Σ Ownership Transactions Effective on or Before T

Ownership Transactions → Historical Ownership States → Cap Table at Selected Date

Economic Effective Date → When Ownership Applies

Record Date → When Information Entered the Controlled Record

Carry Pool Economics + Historical Ownership + Allocation Rule = Participant Carry Allocation

Historical Ownership ≠ Participant Allocation Rule

Correct Ownership History + Correct Allocation Rule = Correct Participant Allocation

Change in Carry Value Through Time ≠ Automatically New Carry Attributable to Current Owners

Greater Timestamp Precision ≠ Greater Economic Accuracy

Legal Discontinuity ≠ Necessarily Economic Discontinuity

Employee Master Data Lifecycle ≠ Carry Participant Data Lifecycle

Same Historical Data + Same Historical Rules = Same Historical Result

The economic ownership architecture is now complete.

Part VIII turns that architecture into numbers:

From Carry Pool to Participant Allocation.

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

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References and Further Reading

Internal Partnership Economics and Intergenerational Ownership

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;
• founder versus non-founder economics;
• carried-interest ownership;
• management-company ownership;
• differences in economic participation between generations of partners;
• senior partner departures;
• succession;
• retention;
• intergenerational conflicts;
• and continuity of private equity organisations.

Particularly relevant to:

Current Seniority ≠ Historical Carry Ownership

Historical Value Preservation + Future Economic Transition

Historical Funds → Earlier Participant Generations

Future Funds → Emerging Participant Generations

Future Funds and Lifetime GP Economics

Chung, Ji-Woong, Berk A. Sensoy, Léa H. Stern and Michael S. Weisbach. “Pay for Performance from Future Fund Flows: The Case of Private Equity.” Review of Financial Studies, Vol. 25, No. 11, 2012, pp. 3259–3304.

Relevant subjects include:

• successive private equity funds;
• future fundraising;
• lifetime GP economics;
• current fund performance;
• future fund economics;
• carried interest;
• incentive compensation;
• and the economic significance of future fund participation.

Particularly relevant to:

Current Carry Ownership ≠ Expected Future Carry Opportunity

Current Carry Value ≠ Future Economic Position

Current Carry Value = €0 ≠ Carry Interest Has No Incentive Value

Participant Carry Portfolio = Carry Interests Across Multiple Fund Generations

Venture Capital Partnership Compensation

Gompers, Paul A. and Josh Lerner. “An Analysis of Compensation in the U.S. Venture Capital Partnership.” Journal of Financial Economics, Vol. 51, No. 1, 1999, pp. 3–44.

Relevant subjects include:

• partnership compensation;
• carried interest;
• management fees;
• incentive compensation;
• compensation across successive funds;
• time-series variation in compensation arrangements;
• and differences between younger and established investment organisations.

Relevant to:

Carry Ownership Through Successive Fund Generations

Current Fund Economics ↔ Future Fund Economics

Economic Participation as Long-Term Incentive Compensation

Economics of Private Equity Funds

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;
• GP compensation;
• management fees;
• fund size;
• successive funds;
• economic value of carry;
• scalability of private equity organisations;
• and differences between contractual compensation and its economic value.

Particularly relevant to:

Carry Percentage ≠ Carry Value

Same Percentage Across Vintages ≠ Same Economic Value

Current Carry Value Depends on Underlying Fund Economics

Private Equity Performance and Successive Fund Generations

Kaplan, Steven N. and Antoinette Schoar. “Private Equity Performance: Returns, Persistence, and Capital Flows.” Journal of Finance, Vol. 60, No. 4, 2005, pp. 1791–1823.

Relevant subjects include:

• successive private equity funds;
• fund performance;
• performance persistence;
• fundraising;
• capital flows;
• fund size;
• and development of private equity organisations across fund generations.

Relevant to the broader context of:

Fund Vintage ≠ Economic Maturity

Current Fund Performance → Future Fundraising → Future Economic Opportunity

Private Equity Organisations Operate Across Overlapping Fund Generations

Partnership Continuity and Human Capital

Morrison, Alan D. and William J. Wilhelm Jr. “Partnership Firms, Reputation, and Human Capital.” American Economic Review, Vol. 94, No. 5, 2004, pp. 1682–1692.

Relevant subjects include:

• partnership organisations;
• human capital;
• intergenerational transfer;
• reputation;
• organisational continuity;
• partner incentives;
• and succession.

Relevant to:

Historical Participant Generations → Future Participant Generations

Economic Participation → Retention → Organisational Continuity

Succession Requires Transfer of Both Responsibility and Economic Opportunity

Partnership Organisation and Succession

Morrison, Alan D. and William J. Wilhelm Jr. “The Demise of Investment Banking Partnerships: Theory and Evidence.” Journal of Finance, Vol. 63, No. 1, 2008, pp. 311–350.

Relevant subjects include:

• partnership structures;
• organisational evolution;
• human-capital development;
• intergenerational transfer;
• ownership;
• incentives;
• and institutional continuity.

Relevant to the broader organisational framework within which long-lived carry arrangements and changing participant generations operate.

Professional Partnerships and Profit Sharing

Levin, Jonathan and Steven Tadelis. “Profit Sharing and the Role of Professional Partnerships.” Quarterly Journal of Economics, Vol. 120, No. 1, 2005, pp. 131–171.

Relevant subjects include:

• profit sharing;
• professional partnerships;
• partner economics;
• organisational incentives;
• ownership;
• quality incentives;
• and allocation of partnership profits.

Relevant to:

Economic Ownership → Participant Incentives

Partnership Economics → Individual Economic Participation

Collective Economics ↔ Individual Economic Interests

Private Equity Teams and Organisational Continuity

Cornelli, Francesca, Elena Simintzi and Vikrant Vig. “Team Stability and Performance: Evidence from Private Equity.” Working Paper.

Relevant subjects include:

• private equity teams;
• team stability;
• employee mobility;
• organisational continuity;
• human capital;
• and investment performance.

Relevant to the broader context of:

Participant Turnover + Long Fund Lives → Need for Historical Carry Ownership

People Change Faster Than Funds

Venture Capital Partnership Human Capital

Ewens, Michael and Matthew Rhodes-Kropf. “Is a VC Partnership Greater Than the Sum of Its Partners?” Journal of Finance, Vol. 70, No. 3, 2015, pp. 1081–1113.

Relevant subjects include:

• individual versus organisational investment skill;
• investment partnerships;
• partner mobility;
• team composition;
• organisational capital;
• and persistence of investment performance.

Relevant to:

Participant Identity ≠ Firm Identity

Individual Contribution ↔ Collective Fund Performance

Changing Team Composition Does Not Eliminate Historical Fund Economics

Carry Allocation Architecture and Historical Participant 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:

• fund-level carry allocations;
• vintage-level allocations;
• deal-by-deal allocations;
• carry points;
• new hires;
• participant turnover;
• vesting;
• forfeiture;
• historical value;
• participant reporting;
• unrealised carry;
• historical distributions;
• and administration of participant interests through time.

Particularly relevant to:

Fund Vintage ≠ Necessarily Carry Allocation Vintage

One Participant ≠ One Carry Percentage Across Time

Participant + Carry Pool + Effective Period = Economic Interest

Historical Ownership → Participant Allocation

Carry as a Long-Term Incentive

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:

• long-term incentives;
• participant motivation;
• retention;
• allocation of carry;
• individual versus collective performance;
• seniority;
• performance attribution;
• and evolution of participant economics.

Relevant to:

Historical Contribution ↔ Future Contribution

Current Economic Ownership ↔ Future Incentive

Carry Ownership Across Time → Participant Behaviour

Employee Carry Pools — Primary-Source Example

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

Relevant subjects include:

• employee carry pools;
• fund-specific carry interests;
• participant eligibility;
• allocations;
• effective periods;
• forfeiture;
• participant departures;
• administration;
• and amendments to participant interests.

Relevant to:

Fund → Carry Pool → Participant Interest

Participant Interest + Applicable Period → Economic Participation

Participant Changes → Historical Carry Administration

Ownership, Incentives and Long-Term Economic Alignment

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;
• managerial incentives;
• agency relationships;
• governance;
• and alignment between ownership and behaviour.

Relevant to the broader conceptual relationship:

Economic Ownership → Economic Exposure → Incentives

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