In which compensation structure are payouts often subject to a multi-year waiting period tied to a fund's investment horizon?
Answer
Private Equity and Hedge Funds profit sharing/carry
Profit sharing mechanisms prevalent in Private Equity and Hedge Funds are tied to the fund's overall performance over a multi-year investment horizon. This results in massive payouts when a fund performs well, but requires financial discipline during interim years due to the waiting period for realization.
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