Free of the burden of annual taxation, Managers can offer multi-year performance periods AND increase the value of their incentive comp.  By deferring crystallization, Managers can guarantee higher returns, whether the Fund is up or down. 

Longer Performance Periods Increase Returns

  1. If the Fund is up, you earn your share of profits on the capital that otherwise would have been crystallized for the Manager.
  2. If the Fund is down, the Manager’s accrued but uncrystallized incentive comp will share in the loss, thereby reducing your loss.