Rupert Bell, CEO, shared his insight with Real Deals on the shifting role of carried interest in private equity
Although still central to PE, carried interest may be losing its appeal due to tax changes and a maturing landscape. Rupert stressed the need for firms to adapt and innovate to stay competitive in this evolving environment.
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“In some respects, a career in private equity is now looking a bit more like a career in a bank. There’s not the same buccaneering Wild West aspect to it being alternative assets; it’s mainstream now.”
Adapting to change
Carried interest, a practice dating back to the Renaissance, remains a cornerstone of the private equity industry. However, Rupert Bell, CEO, noted that its allure has decreased due to tax changes and the evolution of the PE model. While still fundamentally important, carried interest is "slightly less attractive," with deals becoming harder to source, costlier, and yielding smaller returns for most professionals.
The once "buccaneering" nature of PE is now more corporate, with larger funds, complex structures, and tighter regulations. Firms must adapt through proactive sourcing, portfolio management, and technology, or risk obsolescence. Rupert warned, “If you can’t keep up, you’re out.”
Tax and regulatory changes are reshaping the incentive landscape, driving alternative structures like higher salaries, bonuses, and phantom carry, especially for junior professionals. Rupert mentioned a “slightly higher incidence of new firms effectively buying someone out of their lost carry” to secure top talent. Once rare, this practice is happening more often.
International competition, especially from the Middle East, is reshaping the talent pool. Rupert calls the region “the big exception,” offering unique opportunities for career growth and responsibility. “Is it a pull from these factors, or a push from the UK’s decline? Possibly a bit of both.” Despite challenges, carried interest remains pivotal. Rupert concluded that “The industry must evolve to carry on.”
The once "buccaneering" nature of PE is now more corporate, with larger funds, complex structures, and tighter regulations. Firms must adapt through proactive sourcing, portfolio management, and technology, or risk obsolescence. Rupert warned, “If you can’t keep up, you’re out.”
Tax and regulatory changes are reshaping the incentive landscape, driving alternative structures like higher salaries, bonuses, and phantom carry, especially for junior professionals. Rupert mentioned a “slightly higher incidence of new firms effectively buying someone out of their lost carry” to secure top talent. Once rare, this practice is happening more often.
International competition, especially from the Middle East, is reshaping the talent pool. Rupert calls the region “the big exception,” offering unique opportunities for career growth and responsibility. “Is it a pull from these factors, or a push from the UK’s decline? Possibly a bit of both.” Despite challenges, carried interest remains pivotal. Rupert concluded that “The industry must evolve to carry on.”
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