Managing Carried Interest Data: How to Onboard the Best Version of your Data when Using an Outsourced Technology Firm

Managing Carried Interest Data: How to Onboard the Best Version of your Data when Using an Outsourced Technology Firm

Written by Robert Hagmeier

For partners and employees at private capital firms, carried interest programs are a key monetary incentive, often outpacing salary and bonus vehicles for senior team members.  Given carry’s status in the industry, it is vital that CFOs, and anyone tasked with tracking valuations and payments for employees, does so accurately.  Unfortunately, that doesn’t always happen, and errors in the process are commonplace throughout the industry.  As a technology partner in the private equity space, EWM Global is uniquely positioned to observe the various approaches firms take to manage their carry vehicles, and we see clear and consistent patterns to how carry processes evolve over time. 

Most carry-tracking approaches start out as a single spreadsheet tab apportioning a fund’s overall carry down to employee-level using a few simple Excel formulas.  Maintaining this sort of file is easy in the beginning, but without a plan to address changes in an efficient and auditable manner, a once-simple spreadsheet can rapidly become disorganized.   Complexity, introduced as the result of employee turnover, additional point grants skewing the overall percentage ownership in the carry causing formulas to break, new joiners receiving points with alternative vesting schedules, or the sudden need to track certain allocations of carry as income and others as capital gains, force carry tracking sheets into disarray quickly and often unexpectedly. 

EWM Global’s involvement in a client’s carry administration process often begins when they’ve reached a point where their internal spreadsheets are beginning to break.  For larger funds, it may be the sheer amount of transactional and apportionment data (historical and current) their team must maintain on a regular basis, while smaller funds might find themselves struggling with data scattered across multiple spreadsheets, tabs, and sources, with the full knowledge of plan mechanics maintained solely in the head of the CFO.  The shortcomings of administering the carry lifecycle in Excel leads many firms to these eventualities, and EWM’s database-driven approach offers the opportunity to avoid such outcomes by organizing complex plan history into a convenient array of data visualizations and reports.  The finished product makes carry data accessible, easy to update and maintain, and appealing to both client admins and carry recipients.  Appealing as the finished product may be, organizing historical carry information into a state where it can be systematized is a daunting task for CFOs, who have demanding schedules and minimal time to manage such processes.  EWM understands this.  In fact, it is the reason for our Implementation Team, which plays a vital role in the onboarding process. 

EWM’s Implementation Team possesses a wealth of industry knowledge and couples it with a mastery of the EWM platform.  Their deep understanding of incentive plan mechanics, client needs, and industry requirements enables them to unravel the complexities of unique client spreadsheets, ask operative questions, and quickly integrate data onto the EWM system.  Shouldering the burden of understanding and transposing data on our clients’ behalf offers GPs the opportunity to transition to EWM’s platform without the pain of manually migrating the history of their plans themselves. 

 Shouldering the burden of understanding and transposing data on our clients’ behalf offers GPs the opportunity to transition to EWM’s platform without the pain of manually migrating the history of their plans themselves.

The Implementation team’s process of getting to understand each client’s data, and how it compares to similar firms in the industry, makes them some of the most knowledgeable professionals in the market in terms of recommending best practices and maximizing the efficiency of carry administration.  Having seen hundreds of different methodologies for maintaining carry plan information puts EWM at the forefront of being able to help clients get the most out of their carry plans.  Combined with our innovative technology, EWM helps private capital firms of all sizes identify historical errors in their recordkeeping and onboard the best version of their data.  It is our hope that working with EWM not only makes your carry administration easier, but also that our partnership instills the data integrity and automation required to confidently report on and showcase this important incentive mechanism to your employees.