By: Ryan Burger
Senior Vice President - Product Strategy and Client Delivery
May 3, 2025
HR Leaders Turning to SaaS to Effectively Embed Carry Plans into Annual Compensation Cycles
As the alternative investment industry grows, so do the operational activities and complexities related to deferred compensation and carry plans. The rate of firms launching funds, introducing new joiners (and having leavers), and creating novel incentive arrangements increases every year. Today HR leaders are turning to SaaS solutions, rather than spreadsheets, to manage complex carry agreements across annual compensation cycles.
HR leaders at large firms are routinely required to incorporate sophisticated carry agreements into annual compensation cycles. What used to be rare carry provisions like jump ball carry, phantom carry, tiered dilution/accretion, and performance-based vesting scenarios are becoming routine, especially at larger alternative investment firms.
A look at arrangements like jump ball carry and phantom carry can convey how complex managing carried interest agreements has become. While managers bear much of the burden on the front end, rewarding sharp investing and growth, the operational management typically falls on finance, legal, and HR team members.
FirmView® Comp and Carry Management: An Allvue Solution
The Complex Tax Implications of Comp and Carry Agreements
Overseeing the tax implications of complex carry agreements has material short- and long-term impacts on income, for employees and firms alike. Passthrough entities, fee waivers/deemed contributions (aka cashless commitments), tracking hurdles and catch-up, and vesting are a few examples where HR and Finance leaders in private capital face responsibilities that routinely exceed the capacity of spreadsheets alone.
Alternative investment firms are now seeking service providers and technology solutions to better manage the tracking, reporting, and calculations for comp and carry plans. Real-time visibility and secure sharing of critical compensation information are equally important.
Why Taming Comp and Carry Plans Matter for HR Leaders
Comp and carry agreements continue to grow in complexity. Jump ball plans for instance, allow firms to grant bonus awards to specific individuals for specific deals. This is a method used to reward individuals for their direct contributions to specific investments outside of standard grants, or take phantom carry where individuals are granted percentages or points in the carry program but are treated differently from a legal and tax perspective.
It turns out these mechanisms have impacts from computation, tax, and cash movement perspectives. Depending on the structure of the carry agreement, individuals may or may not receive K-1s for grants and payments may be made through payroll as opposed to direct payments that are typically made for carry partner distributions.
Carry Grant Complexities Can Create Short and Long-Term Tax Implications
Paul Patrow, a tax partner at Paul Hastings, explained the risk with 409A considerations related to phantom carry in a recent discussion with Esther Chiang, an investment funds and private capital partner at Paul Hastings.
As Paul noted regarding phantom carry, “It is a bonus point. It’s not an equity interest. It’s a bonus plan for tax. One of the key complexities is, when you set that up, you need to make sure you’re working with your executive compensation advisors to make sure that you’re not triggering the 409A penalty excise tax.”
It’s Time to Move Beyond Comp and Carry Agreement Spreadsheets
These concerns add layers of complexities in terms of documentation, often with numerous notional accounts for unwinding the fund-level carry waterfall. These layers require handling data well beyond the parameters of simple inflows and outflows necessary for accurate reporting that could be facilitated with a spreadsheet. It also requires integration into tax, legal, and HR processes and systems.
FirmView® Comp and Carry Management: An Allvue Solution
FirmView helps private capital firms manage carry, co-investments, and deferred comp in one secure platform, reducing spreadsheet risk and improving control. To learn more about how HR leaders use FirmView to manage their compensation, planning and recommendation programs talk to Allvue.
More About The Author
Ryan Burger
Senior Vice President - Product Strategy and Client Delivery
Ryan is responsible for Product Strategy and Solution Delivery over FirmView at Allvue Systems (formerly PFA Solutions). Since joining PFA in 2018, Ryan has helped a diverse array of Finance and HR alternative investment leaders digitize and automate processes and reporting related to carried interest, employee co-investments, and compensation. Ryan has extensive experience and knowledge in alternative asset operations, consulting, and software implementation, enabling him to lead the successful delivery of solutions that meet the complex and evolving needs the alternative investment industry.
