That's a lot of carry

New carried interest research released


Happy Monday. Here’s what we’ve got today…

  • A look at new research attempting to measure the value of carried interest

  • Plus, Carlyle considers Cogentrix exit


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Pulling the numbers on carried interest:

New research from Ludovic Phalippou, a professor at the University of Oxford’s Saïd Business School, attempts to measure the scale of private equity carried interest over the past two decades. Based on available fund performance data from Preqin, Phalippou estimates private markets investors have generated more than $1 trillion in total carry, including unrealized amounts, since 2000.

It should be noted that the paper relies on an array of assumptions as a means to bridge gaps in the data, so its findings may be more directional than precise. Even so, the work provides some interesting takeaways.

Unsurprisingly, the data show carry disproportionately accruing to a relatively small number of the largest U.S.-based private equity firms, with some representation from a handful of European rivals.

The Trillion Dollar Bonus of Private Capital Fund Managers

TVPI on a consolidated basis was shown to be 1.6 times, or, in other words, funds returned $1.60 to their limited partners for every dollar invested. Interestingly, TVPI metrics were relatively similar among the sampling of firms. This fact, notes Phalippou, implies that differences in carry across firms are more likely to reflect differences in the amount of capital under management than performance. Backing up the point, Phalippou found the correlation between carry and either TVPI or IRR was zero.

Other notable cases of uniformity across firms were the carry rate and hurdle rate. Nearly all strategies had 25th and 75th percentile carry rates of 20 percent, excluding only fund of funds, secondaries, and private debt. Most hurdle rates were 8 percent, save for some lower hurdles within various credit and real assets strategies.

But, rather than a granular breakdown of fund performance detail, Phalippou says the real purpose of his research (titled The Trillion Dollar Bonus of Private Capital Fund Managers) is to highlight the magnitude of carried interest and show policymakers the taxable opportunity it provides—should it be reclassified from the lowest possible long-term capital gains rates to the meaningfully higher tax rates on earned income.

In the US, each of the three most recent administrations has targeted carried interest as part of their tax reform agendas, but despite some scares in recent years, all efforts ultimately failed.

Pressure remains high in the UK, where the Labour Party has pledged to close what they call an "absurd" loophole by taxing carried interest at the highest income tax rate of 45 percent—a move that, according to shadow chancellor Rachel Reeves, could increase industry taxes by nearly £440 million per year.


Carlyle is exploring the sale of Cogentrix, a North Carolina-based power producer, which could value the business at up to $4 billion, per the Financial Times.

Primo Water agreed to merge with BlueTriton Brands, a Stamford, CT-based beverage company whose offerings include Deer Park and Poland Spring, in an all-stock transaction.

Searchlight Capital Partners and Ares agreed to provide £500 million in preferred equity and a £300 million debt facility to RSK Group, a UK-based environmental engineering firm.

TowerBrook Capital Partners acquired a majority stake in LiftWerx, a Canada-based provider of maintenance services to the wind industry.

Ardian, APG, and PGGM are preparing to sell LBC Tank Terminals, an operator of bulk liquid storage facilities, with a process expected to kick off later this year that could value the business at around €1.5 billion, per Bloomberg.

Sampo Oyj agreed to acquire Topdanmark, a Danish P&C insurer, for around $4.7 billion in an all-stock deal.

Phillips 66 (NYSE: PSX) agreed to sell its 25 percent stake in Rockies Express Pipeline, a 1,714-mile natural gas pipeline system, to a subsidiary of Blackstone-backed Tallgrass Energy for around $1.28 billion.

Everlane Equity Partners invested in Carey & Co., a provider of outsourced financial leadership and operations support for nonprofits.

Temasek agreed to acquire a minority stake in Betashares, an Australian exchange-traded fund manager backed by TA Associates, for up to A$300 million.

Tiger Infrastructure Partners acquired Unison Energy, a microgrid and energy-as-a-service platform, from American Infrastructure Funds and Hunt Companies.

Cristiano Ronaldo acquired a 10 percent stake in Vista Alegre Atlantis SGPS, a Portuguese manufacturer of porcelain and ceramic items, from Grupo Visabeira.

Trive Capital and Bluejay Capital Partners invested in RPM Freight Systems, an asset-light finished vehicle logistics provider.

JDH Capital withdrew its $2 billion all-cash offer to acquire The Kinetic Group, the ammunition business of Vista Outdoor (NYSE: VSTO) that includes the Federal, Remington, CCI, Hevi-Shot, and Speer brands.


WEBTOON Entertainment, an online cartoon platform majority-owned by South Korea's Naver, set terms for its U.S. IPO at 15 million shares priced between $18 - $21 and a market value of up to $2.67 billion.

LandBridge, a Five Point Energy-backed Permain Basin landowner, set terms for its NYSE IPO at 14.5 million shares priced between $19 - $22, or a market value of up to $1.6 billion.

Tamboran Resources, an Australian natural gas company, set terms for its U.S. IPO at 6.5 million shares priced between $24 - $27, or a market value of up to $474 million.

Concentra Group, an occupational health services provider being spun out of Select Medical, filed for a NYSE IPO to raise up to $100 million.


Tech, Vertical SaaS, & Misc. Enterprise

Tinybird, a real-time data platform, raised $30 million in Series B funding led by Balderton Capital, with participation from CRV and Singular Ventures.

Constructor, a product discovery platform for enterprise ecommerce, raised $25 million in Series B funding led by Sapphire Ventures, with participation from Silversmith Capital Partners.

Aim Security, an Israeli enterprise cybersecurity startup, raised $18 million in Series A funding led by Canaan Partners, with participation from YL Ventures.

Omi, a Paris-based 3D visual generation platform for brands, raised €13 million in Series A funding led by Dawn Capital, with participation from Founders Future.

GPTZero, an AI-generated content detection platform, raised $10 million in Series A funding led by Footwork VC, with participation from Reach Capital, Uncork Capital, Neo, and Alt Capital.

Hona, a Lehi, UT-based client engagement software for law firms, raised $9.5 million in Series A funding led by Costanoa Ventures, with participation from Ludlow Ventures, Soma Capital, and Y Combinator.


AfterHour, a social trading app, raised $4.5 million in seed funding co-led by Founders Fund and General Catalyst, with participation from Pear VC.

Consumer & Media

Oyo, an Indian multinational hospitality chain, is raising between $100 million and $125 million in a Series F round that values the company at $2.5 billion, down over 70 percent from its previous $10 billion valuation in 2019.

Tender Food, a Somerville, MA-based alternative food startup, raised $11 million in Series A funding led by Rhapsody Venture Partners, with participation from Lowercarbon Capital, Safar Partners, Claridge Partners, and Nor'easter Ventures.


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