Carried Interest Debate (Blog Post)
| Carried Interest Debate (Blog Post) | |
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Abstract
To many, the concept of carried interest is confusing or meaningless, and the question as to why anyone would debate something so arcane is even more so. In all likelihood, the concept of the exorbitantly wealthy Wall Street bankers or hedge-fund managers is much more familiar, so we will start from there. The objective of this blog post is to shed some light on the obscure world of "hedge funds," explain why the managers are perceived to pay so little tax, and explore recent political developments that may or may not affect that perception in the future.
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First, let's clear one thing up. When Donald Trump and Hillary Clinton rally against "hedge-funds" for paying so little tax [1], they are actually referring to private investment funds in general. In short, a private investment fund invests capital in order to achieve returns for investors. It is that simple; although, the types of funds, means through which capital is raised for the funds, how the capital is invested, where the profits are distributed, etc... can complicate the situation.
One must understand the basic structure of a private investment fund before considering the aforementioned complications. These funds, set up as limited partnerships or limited liability companies,
