carried interest

Carried interest refers to the share of profits that general partners (fund managers) receive from investment funds, typically private equity and hedge funds, after the investors have received their initial capital back plus a predetermined preferred return. This performance fee is a key component of compensation for fund managers. Recent news highlights a growing competition between Hong Kong and Singapore to attract financial talent by offering tax incentives on carried interest. Singapore has unveiled a tax-exemption scheme, prompting Hong Kong to accelerate its own proposed tax break legislation. This bill, currently before Hong Kong's Legislative Council, aims to revise tax rules on carried interest, reflecting its significance in the financial industry's efforts to retain and attract fund managers. The debate surrounding these tax breaks underscores the financial centers' rivalry and their strategic use of fiscal policy to bolster their positions as leading investment hubs.