Carry Advisors AUM: A Comprehensive Guide

Carry Advisors, also known as performance-based advisors, are investment professionals who receive compensation based on the performance of the assets they manage. This fee structure, known as the "carry," aligns the interests of the advisor and the investor, incentivizing the advisor to generate strong returns.

AUM of Carry Advisors

The assets under management (AUM) of carry advisors have grown significantly in recent years, driven by the increasing popularity of performance-based fees. According to Preqin, the global AUM of carry advisors surpassed $2.4 trillion in 2022, a 15% increase from the previous year.

Drivers of AUM Growth

Several factors have contributed to the AUM growth of carry advisors:

• Increased Demand for Performance-Based Fees: Investors are increasingly seeking alternative investment strategies that offer the potential for outsized returns. Carry fees provide a compelling incentive for advisors to deliver strong results.
• Diversification: Carry advisors often invest in a wide range of asset classes, including private equity, venture capital, and hedge funds. This diversification can help reduce portfolio risk and enhance returns.

Top Carry Advisors by AUM

As of 2022, the top five carry advisors by AUM were:

Strategies Employed by Carry Advisors

Carry advisors typically employ a range of investment strategies to generate returns for their investors, including:

• Private Equity: Investing in privately held companies with the goal of generating long-term capital appreciation.
• Venture Capital: Providing funding to early-stage startups with high growth potential.
• Hedge Funds: Utilizing a variety of investment techniques to generate absolute returns, regardless of market conditions.

Fees Charged by Carry Advisors

Carry advisors typically charge two types of fees:

• Management Fee: A fixed percentage of the AUM, typically ranging from 1-2%.
• Carry Fee: A percentage of the profits generated by the advisor's investments, typically ranging from 20-30%.

Pros and Cons of Carry Advisors

Pros:

• Performance-Based Compensation: Carry fees align the interests of advisors and investors, incentivizing strong returns.
• Diversification: Carry advisors often invest in a range of asset classes, reducing portfolio risk.
• Potential for Outsized Returns: Performance-based fees provide the potential for higher returns than traditional investment strategies.

Cons:

• High Fees: Carry advisors charge higher fees than traditional investment managers.
• Risk: Carry fees are only paid if the advisor generates profits, which can increase investment risk.
• Lack of Transparency: Carry advisors often do not disclose specific investment details, which can make it difficult for investors to evaluate performance.

Innovative Approaches to Carry Fee Structures

In recent years, several innovative approaches to carry fee structures have emerged, including:

• Hurdle Rates: Implementing a minimum return threshold that must be met before carry fees are earned.
• Clawback Provisions: Requiring advisors to return carry fees if investments underperform certain benchmarks.
• Tiered Carry Fees: Structuring carry fees with multiple tiers, providing for higher potential returns if performance exceeds certain milestones.

FAQs about Carry Advisors AUM

1. How is Carry AUM calculated?
   - Carry AUM is typically calculated as the total value of the assets managed by the advisor under carry fee arrangements.
2. What is the average carry fee?
   - The average carry fee charged by carry advisors ranges from 20-30%.
3. Who should consider investing with a carry advisor?
   - Investors seeking alternative investment strategies with the potential for outsized returns may consider investing with a carry advisor.
4. What are the risks of investing with a carry advisor?
   - Potential risks include high fees, investment risk, and lack of transparency.
5. How can I evaluate the performance of a carry advisor?
   - Investors should consider the advisor's track record, investment strategy, and fee structure.
6. What are some innovative approaches to carry fee structures?
   - Hurdle rates, clawback provisions, and tiered carry fees are examples of innovative carry fee structures.