By: Richard Change
Head of PFA Solutions
January 22, 2026
At a Glance
- Compensation and carried interest remain central to incentive alignment in private equity, but how these programs are structured and managed continues to evolve alongside investment strategies and industry trends.
- Firms operate across multiple funds, vehicles, and co-investment structures, increasing complexity across allocation models, vesting terms, distributions, and tax considerations.
- Ownership of compensation and carry spans finance, HR, legal, and operations, raising governance and control requirements.
- Partners and employees expect clearer reporting and better visibility into vested and unvested awards, historical distributions, and potential future value.
- As firms scale, spreadsheet-based processes introduce operational risk, prompting many to rethink their approach.
Why Today’s Operating Model Is Under Pressure
As private equity firms diversify strategies, launch multiple vehicles, expand co-investment programs, and grow headcount, compensation and carry have become some of the most operationally complex and risk-sensitive areas of the firm. This trend is reflected across private capital research and advisory literature, including Allvue Systems’ Definitive Guide to Carry and Compensation Management.
Many firms still manage these programs with spreadsheets, manual processes, and fragmented systems that were never designed for this level of complexity. This challenge is frequently cited in private equity operational research, including Deloitte’s work on operational excellence in private markets (Deloitte – Private Equity Operational Excellence).
The New Reality of Compensation and Carry
Across the private equity market, a few themes consistently surface in conversations with CFOs, finance leaders, and HR teams, as well as in industry research from firms like Preqin and Heidrick & Struggles.
- Manual Processes Do Not Scale
What worked at $2B AUM often breaks at $10B+. Excel models proliferate, ownership becomes unclear, and institutional knowledge lives in individuals’ heads instead of systems. Operational risk tied to spreadsheet dependency is a recurring theme in private markets research on operational resilience and risk management. The result is operational risk in an area that directly impacts talent retention, investor confidence, and firm reputation and liability.
- Carry Structures Are More Nuanced Than Ever
Firms manage multiple funds, SPVs, SMAs, and bespoke co-investment structures, each with its own set of allocations, dilution and accretion rules, vesting schedules and economics. Allocation methodologies can consist of fund-level, investment-level, tranche-based, and hybrid or vintage-based models which is well documented in industry benchmarking and compensation research, including insights published by PE Professional and Allvue Systems’ Definitive Guide to Carry and Compensation Management.
- Transparency Expectations Are Rising
Partners and employees want clearer answers to basic questions:
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- What’s the value of the carry grants that I have?
- Which grants have been vested?
- What has been distributed?
When those answers take weeks to compile or require reconciliation across multiple spreadsheets and systems, confidence erodes. Research from total rewards and compensation advisory firms continues to link transparency in long-term incentives to retention and engagement outcomes (Mercer – Total Rewards).
- Finance, HR, and Legal Are More Intertwined
Compensation and carry sit at the intersection of payroll, performance management, tax, compliance, and long-term incentives. Promotions, departures, discretionary awards, fund restructurings, and new incentive plans ripple through the data.
Governance and reporting expectations for GPs continue to rise, as emphasized in guidance from organizations like the Institutional Limited Partners Association (ILPA) and private capital advisory research from firms such as PwC.
Why Firms Are Rethinking Their Approach
Leading private equity firms are beginning to treat compensation and carry with the same rigor they apply to fund accounting and investor reporting. They are asking:
- How do we centralize compensation, carry, and co-investment data?
- How do we reduce dependency on spreadsheets and key individuals?
- How do we give stakeholders confidence in the numbers without adding headcount?
- How do we support growth without rebuilding processes every time?
Increasingly, firms are moving away from point solutions and toward purpose-built platforms designed for private markets complexity. This shift is highlighted in broader private capital technology and operations research.
What a More Structured Model Looks Like
Modern compensation and carry management increasingly requires:
- A single source of truth across compensation, carry, and co-investments
- The ability to model, track, and report across funds, vehicles, and participant types
- Clear audibility and governance for allocations, vesting, and distributions
- Transparency for internal stakeholders without increasing operational burden
These principles and the operational frameworks to support them are explored in depth in Allvue Systems’ Definitive Guide to Carry and Compensation Management.
If you see these pressure points firsthand, whether through reporting delays, reconciliation challenges, or growing questions from leadership and employees, it may be time to rethink how compensation and carry are managed at your firm.
Download the Whitepaper: The Definitive Guide to Carry and Compensation Management
These trends and the operational realities behind them are explored in detail. Learn how your firm can empower professionals in the private capital space to make informed decisions about compensation and keep teams incentivized.
👉 Download the Whitepaper: The Definitive Guide to Carry and Compensation Management
More About The Author
Richard Change
Head of PFA Solutions
Richard Change joins Allvue as a member of the senior leadership team, following Allvue’s acquisition of PFA Solutions. In 2012 he set out as co-founder to start PFA Solutions. As the former Chief Architect at a leading private equity firm, Richard Change saw a gap in data standards, as well as limitations on how firms stored and tracked investment information. PFA focused on technology solutions for calculating GP Carried Interest allocations, total compensation management and tracking consolidated investor and portfolio performance information across funds. In addition to his role at PFA Solutions, Richard works with various industry committees and serves on the board on various local organizations. Prior to co-founding PFA Solutions, Richard was the Chief Application Architect at The Carlyle Group. He has over 20 years of technology experience and a deep understanding of fund operations, performance management, carry and co-invest within the Private Capital markets.
