Why Carried Interest Is Becoming a Powerful Retention Tool for Public Asset Managers

Carried interest is increasingly viewed as a critical executive compensation tool because of its ability to create long-term “holding power” for top executives and other key talent. As competition for high-performing investment professionals intensifies, public asset managers are adopting compensation structures that more closely resemble those of the private markets.

In a recent Fortune article, Farient Chief Operating Officer R.J. Bannister addressed BlackRock’s decision to incorporate carried interest into its executive compensation framework as a strategic response to shifting talent dynamics. Bannister observed that the growing migration of professionals from public investment firms to private companies has been driven largely by the more lucrative economics of carried interest programs. Against this backdrop, BlackRock’s move follows a similar step taken by Goldman Sachs, underscoring what is likely to become a broader industry trend.

Both BlackRock and Goldman Sachs have adopted carried interest–style incentives for senior executives within their alternative asset divisions, which include private equity, infrastructure, real estate, and credit strategies. These businesses have become essential growth engines for both firms. By tying compensation more closely to long-term investment outcomes, the firms aim not only to attract and retain top talent but also to reinforce a culture of accountability and sustained performance.

The strategic importance of alternatives for firms such as BlackRock and Goldman is evident in the scale of investments.

BlackRock, the world’s largest asset manager, has steadily expanded its footprint in this space, amassing more than $300 billion in alternative assets under management by 2025. Goldman Sachs, long known for its investment banking franchise, has likewise accelerated the growth of its asset management platform with a strong emphasis on private markets. Together, these efforts have positioned both firms among the world’s leading alternative asset managers.

A defining feature of carried interest programs is the use of total forfeiture provisions — often characterized as “handcuffs” — which are designed to discourage premature departures. Bannister reframes these provisions as a source of “holding power,” noting that executives who leave before awards vest may forfeit a significant amount of value. From this perspective, holding power represents the economic stake an executive has in remaining with the firm over the long term.

In an interview for Farient Briefings, Bannister emphasized that understanding holding power is now central to assessing “talent vulnerability,” an area of growing focus for compensation committees and boards. As part of their expanding remit, committees are increasingly expected to evaluate talent risk alongside traditional pay oversight.

“Gauging talent vulnerability requires compensation committees and boards to understand both holding power — the value of unvested long-term incentive grants — and pay positioning, or how an executive’s compensation compares to the market,” Bannister explained. Farient’s Talent Vulnerability Framework™ helps identify which executives may be at risk of departure and estimates the “opportunity gap,” or the cost, required to retain them. By analyzing these inputs together, boards gain a clearer view of where targeted investments in talent may be needed, he said.

Holding power, Bannister added, can be understood as the amount an executive would leave on the table by walking away — or, alternatively, what a competing firm would need to offer to make that executive whole. In practice, Farient’s client work involves estimating what an executive might earn if recruited to a comparable role at a larger organization or to a position one or two levels higher. This approach requires more expansive and nuanced benchmarking because it provides insight into retention risk and compensation strategy.

Farient’s View

As competition for senior investment talent continues to intensify, these concepts and practices will become essential tools for today’s compensation and talent management committees, particularly as firms seek to balance growth ambitions with effective risk oversight.