IFM37220 - Charging Provisions: Carried interest from other funds and retired funds managers

Carried interest from other funds and retired fund managers

The rules apply to carried interest which arises to an investment manager, even if it arises from another investment scheme to which no investment management services are provided. The only condition is that the carried interest arises to the fund manager under the arrangements by which he or she provides investment management services to a collective investment scheme.

Example

A fund management house provides investment management services to three separate collective investment schemes known as A Fund, B Fund and C Fund. Kofi, a fund manager who works for the fund house has provided investment management services for A Fund. The carried interest hurdle for A Fund has been met. However, the proceeds have not been released to the carried interest holders. Arrangements are put in place within the fund management business so that carried interest from B Fund which is ready to pay out is passed to Kofi.

Even though Kofi has not provided investment management services for B Fund, the carried interest rules may still apply as the fund manager has received carried interest under arrangements where they have provided investment management services to a collective investment scheme.

Carried interest rules also apply where a fund manager has retired or has ceased to perform investment management services and is still in receipt of carried interest. There is no requirement that the individual is still performing investment management services when the carried interest arises provided the fund manager is performing, or has previously performed, investment management services. If the fund manager has at some point performed investment management services in respect of a collective investment scheme and the carried interest arises under those arrangements, it comes within the scope of these rules.