Forbes – The Securities and Exchange Commission (SEC) announced its plan to raise certain dollar thresholds that would need to be met before investment advisers can charge their clients performance fees. Performance fees, also known as “carried interest”, are a feature of almost all private equity funds, venture capital funds, hedge funds and other “alternative investment” vehicles.
Currently, Rule 205-3 under the Investment Advisers Act allows an adviser to charge its clients performance fees in only a limited number of circumstances, including where either (a) the client has at least $750,000 under management with the adviser; or (b) the adviser reasonably believes the client has a net worth of more than $1.5 million. In the context of hedge funds and private equity funds, “clients” would refer to the prospective investors in these funds.
