Private debt firms most likely to grant carried interest without co-investment
Private debt firms are more likely to grant carried interest to employees without co-investment than any other type of private markets firms, a new Preqin report has found.
The 2025 Preqin Private Capital Compensation and Employment Review report commissioned Ferguson Partners to survey 86 private capital firms worldwide about their remuneration policies.
An overwhelming 100 per cent of respondents from private debt firms said that carried interest is granted by the company, rather than co-investment.
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In comparison, 81 per cent of respondents from leveraged buyout firms said that carry was granted by the firm, with the remainder acquired through co-investment.
And less than 70 per cent of those surveyed from natural resources firms said that carried interest was granted by the company.
“The ways in which firms grant carry and incentivise their partners and employees varies across strategies,” Preqin said.
“Providing carry in a fund via a grant by the firm accounts for the large majority, given the need to align management with limited partners. However, co-investment is popular in certain strategies, most notably funds of funds (38 per cent).”
Carried interest has hit the spotlight in recent months, after it emerged that Chancellor Rachel Reeves was looking to close what she called a “tax loophole” on private markets managers’ profits from successful deals.
In last month’s Budget, it was confirmed that capital gains tax on carried interest would rise from the current 28 per cent to 32 per cent in April 2025.
However, the Budget also said that “the government believes there is a compelling case for reform in this area”, which implies there may be further changes down the line.
This could involve creating a distinction between pure carried interest and co-investment through carry structures, which is the case in several European countries, creating an exemption for co-investment from income tax.
