Public vs. Private Asset Manager Structures

Introduction

The corporate structure of alternative asset managers has undergone a fundamental transformation over the past decade. When Blackstone went public in 2007 (the first major alternative manager to IPO), it listed as a publicly traded partnership (PTP), following the traditional private equity model of passing through income to unitholders without entity-level taxation. Every major alternative manager that followed, KKR, Apollo, Carlyle, Ares, chose the same structure. Between 2018 and 2020, all of them converted to C-corporations, a shift that reshaped their investor bases, unlocked index inclusion, and fundamentally changed how these firms are valued by public markets.

For FIG bankers, the partnership-to-C-corp conversion trend generated significant advisory work (structuring the conversions, advising on tax implications, capital markets transactions) and continues to have implications for how alternative managers are valued, traded, and analyzed.

Private equity and alternative asset management firms have historically been organized as partnerships because the structure offered significant tax advantages. Partnerships are "pass-through" entities: they do not pay entity-level income tax. Instead, income flows through to individual partners, who pay tax at their personal rates. For carried interest (taxed as long-term capital gains at 20% federal), this meant the firm avoided corporate tax entirely on its most profitable revenue stream.

When these firms went public, they maintained the partnership structure by listing as publicly traded partnerships. Investors received K-1 tax forms (rather than the simpler 1099 forms that C-corp shareholders receive), which complicated tax filing and limited the pool of potential investors. Many institutional investors, including mutual funds, index funds, and certain pension funds, were restricted by their mandates from holding partnership units.

The Tax Cuts and Jobs Act of 2017 lowered the corporate tax rate from 35% to 21%, dramatically narrowing the tax advantage of the partnership structure. The conversion timeline:

The conversions were driven by three reinforcing factors. First, the reduced corporate tax rate (21% vs. the prior 35%) made the tax cost of C-corp status far more manageable. Second, C-corp status eliminated the K-1 complexity that deterred retail and institutional investors, broadening the potential shareholder base. Third, and most consequentially, C-corp status made these firms eligible for inclusion in major stock indices (S&P 500, Russell 1000), which partnerships could not join.

Publicly Traded Partnership (PTP)

A business organization that is structured as a partnership (passing through income to unitholders without entity-level taxation) but whose ownership interests (units) are publicly traded on a stock exchange. PTPs were the preferred listing structure for alternative asset managers from 2007 to 2018 because they preserved the partnership's tax pass-through treatment for carried interest and other income. However, PTPs have significant limitations: unitholders receive K-1 tax forms (complex for retail investors), many institutional investors are restricted from holding PTP units, and PTPs are ineligible for inclusion in major stock indices. These limitations constrained the investor base and trading liquidity for alternative manager stocks, ultimately motivating the industry-wide conversion to C-corporation status.

The most powerful consequence of C-corp conversion was S&P 500 index eligibility. Index inclusion creates a structural source of demand for a company's stock: every passive fund that tracks the S&P 500 must purchase shares, and the growing dominance of passive investing means index inclusion provides an expanding base of permanent shareholders.

The timeline of S&P 500 inclusions illustrates the value:

Each inclusion triggered significant stock price appreciation as index funds purchased shares and the firms gained visibility among a broader investor base. The index inclusion effect compounds over time: as passive AUM grows and more capital flows into index-tracking products, the demand for S&P 500 component stocks increases proportionally.

The listing trend extends beyond the US. CVC Capital Partners (approximately $180 billion AUM) completed its IPO on Euronext Amsterdam in 2024, becoming the latest European alternative manager to access public markets alongside EQT (Nasdaq Stockholm) and Partners Group (SIX Swiss Exchange). European listings face different dynamics: there is no equivalent to S&P 500 index inclusion as a valuation catalyst, local investor bases tend to be smaller, and European tax regimes vary by jurisdiction. Nevertheless, the strategic logic is similar: public listing provides permanent capital for acquisitions, currency for talent retention, and visibility with institutional allocators.