The transfer of carried interests in hedge funds and private equity funds is an attractive estate planning technique for general partners of those funds. While such transfers typically occur early in the life of a new fund, they may be completed at various times during the life of the fund depending on the intent of the transfer. For gift tax purposes, a taxable event occurs at the time of transfer. If a charitable transfer occurs later in the life of the fund, the donor’s income taxes in the year of the contribution will be affected. In either case, a business valuation is required to establish the fair market value of the transferred interest at the time of the transfer.

Within the general carried interest structure used by hedge funds and private equity funds, significant variations can exist from one fund to the next. As a result, a “one size fits all approach” cannot be applied in the valuation of these interests. In order to develop a credible business appraisal for a carried interest, the appraiser must have in-depth knowledge of the variety of structures utilized, the dynamics of the hedge fund and private equity fund industries and an understanding of the markets in which they invest.

Valuing limited partnership interests in private equity and hedge funds is another aspect of our alternative asset practice, including many large portfolios of such assets. Issues of control and marketability generally support valuation discounts for estate planning purposes, although the range of discounts can vary significantly. The thoughtful application of discounts to such assets in large portfolios requires the appraiser to understand the nuances that impact value from one fund to the next, as well as the current market environment and the growing secondary market for alternative assets.

Our professionals have almost 30 years of experience in valuing carried interests and limited partnership interests in hedge and private equity funds. You can rely on that expertise to result in a defensible and thoughtful appraisal. We have a team of valuation professionals who specialize in this area, guiding you smoothly through the valuation process.




Hugh Woodside, ASA, CFA
Boston: 617.535.7785
Rochester: 585.794.5720​

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