Not significantly more. I see their tax returns and financials.

Surprisingly, not much more the way they've been structured.

Ten years ago, the average $100 million fund would likely have 3-5 principals who be picking about 4 companies each, with varying investments in each of the 4 companies.

Today, I'd guess the average billion dollar fund has 4-6 principals who are picking about 4 companies each.

But the investment size is bigger. They've added a few bells and whistles to help them pick better or to provide some additional leverage to their investments (e.g., HR specialists, more skilled analysts, etc.), but really not much.

In my experience, it depends on the fund and the types of investments pursued.

In most cases I agree with you. But some funds, like those specializing in overseas investments, have significantly more operating costs than those throwing darts at a board made up of US public cos.

Think this way, and all your clients will be mine!

I'm mostly familiar with those that throw darts at private companies.

If you're in the world of the hedge fund or the like, it's not the one whereof I speak.

Bullshit
 

I can see an argument for that. There's also a some law on both sides of the issue. It's something the Service has issued Revenue Procedures for guidance on, but it's still working itself out.

Of course, if I can anticipate your next point...no, the value of the carry isn't zero on day one. It's the NPV of the estimated payout. Based upon the manager's past record and the market conditions, someone much more mathematically adept than I could produce a value. But then, your guys would be paying tax on dry income, years before they see the cash.

Don't be stupid. I advise the funds, not the principals.

Bullshit
 

Not my next question at all.

My next question was what you valued the partnership interest at the day you started a new law firm?

Remember, these guys started the Company (or Fund, as the case may be), and they have a separate stream of income in the management fee to pay salary to all the service providers. The Company buys all the assets after the day they get their interest.

If your new law firm happened to buy a little office condo, would you expect to pay ordinary income when you sold it? Would it have affected the amount you took into income when you started the firm?

So none of your clients will ask the question of "how do we structure for capital gains" if the bill passes?

Bullshit
 

How much would you pay to buy in to Blackstone?

I told you, the math is out of my range of ability. The concept is not. If you mean to suggest that the carry is worth zero because thee limiteds haven't paid in their capital yet, that's absurd. If you are sugggesting that a valuation expert couldn't look a the historic returns, the implied values from the Blacksotone IPO and the other IPOs being bandied about, and the size of the fund and come up with a value, you're either being disingenous or naive.

Or cyring, for that matter.
 

some guy:

• [N]o one seems to be pointing out that Bush spent the whole press conference say we are fighting Al Queda, then concluded by disagreeing that Al Queda is stronger then it was in 2001. In 2001, they highjacked four airliners using box cutters and today, according to administration spin, they have the entire United States Army bogged down! How do people sit there and not start laughing, I don't know.

Not within the scope of their current engagements. I deal in transactions, not in general business counseling.

Bullshit
 

You're not answering my question.

As to yours, I view the math as about as meaningful as the folks who calculate the odds of who will win the next Presidential election.

All I am suggesting is that when someone starts a company, any company, and puts nominal cash in, even no cash, and then builds up a business over a long period of time, that business is a capital asset. Whether they take a bank loan or do an equity financing to get more capital doesn't change the fact that the business is a capital asset as a whole. (note that this is different than the points assuming we have a partnership with flow-through taxation - this argument is on your turf and looking at the partnership as an entity).

The fact that someone has built up many companies before and are quite good at it, doesn't change that fact.

This sounds comfortable.