The financial landscape is undergoing a significant transformation, with traditional asset managers increasingly venturing into the lucrative realm of alternative investments. BlackRock, the world’s largest asset manager, is actively reshaping its strategy to compete in this evolving market, a move underscored by its recent introduction of an executive carry program. This initiative, adopted on January 13, aims to retain top talent by offering senior executives a direct share of profits from the firm’s private market funds, signaling a direct challenge to established private equity giants like Apollo, Blackstone, and KKR.
This strategic pivot by BlackRock, historically known for its low-cost ETFs and index funds under the iShares brand, highlights a broader industry shift. The alternatives sector, encompassing private equity, private credit, infrastructure, and real estate, is projected for substantial growth. KKR estimates the industry could expand to over $24 trillion by 2028, up from $15 trillion in 2022, while Bank of New York forecasts a tripling of private wealth investors’ alternatives assets under management to $12 trillion. Such projections are driving a fierce competition not just for investor capital, but for the skilled professionals capable of managing these complex assets.
A key aspect of BlackRock’s new compensation structure is its alignment with the private equity industry’s carried interest model. This approach offers significant tax advantages, as carried interest is typically taxed at a lower rate of around 20% compared to the up to 37% levied on regular compensation. Eric Hosken, a partner at Compensation Advisory Partners, notes that this makes it a highly attractive vehicle for employees, effectively treating them as owners in the investment entity. This competitive compensation framework is crucial for BlackRock as it seeks to attract and retain individuals who might otherwise migrate to pure-play private equity firms known for their more lucrative pay structures. R.J. Bannister of Farient Advisors observes a sustained flow of talent from public company investment sectors to private ones precisely because of these more attractive carried interest programs.
BlackRock’s commitment to alternatives is further evidenced by a series of significant acquisitions. The firm’s purchases of Global Infrastructure Partners in 2024 and HPS Investment Partners in 2025, totaling over $24 billion, have propelled it into the top five global alternatives providers. Additionally, the acquisition of private markets data provider Preqin for $3.2 billion in 2025 rounds out its offerings. These investments aim to position BlackRock for substantial growth, with CEO and Chairman Larry Fink targeting $400 billion in private markets fundraising by 2030. The firm anticipates that revenue from private markets and technology will constitute more than a fifth of its total revenue in the coming years.
The executive carry program includes provisions designed to enhance talent retention. If an executive leaves BlackRock to join a competitor or engage in what the firm defines as “competitive activity,” both vested and unvested portions of their carry distributions are subject to forfeiture. This “bad leaver” clause, while not unique in the industry, is notably stringent in its application to vested interests. Aalap Shah, managing director of Pearl Meyer, suggests these provisions serve both to maintain team cohesion and deter competitors from poaching key personnel, making it financially costly for an executive to depart. Furthermore, the program features a backloaded vesting schedule, with executives not vesting at all until the third year of a five-year period, a structure described by Steffen Pauls, founder of Moonfare, as “unusual but investor-friendly.”
This shift in compensation strategy mirrors similar moves by other major financial institutions. Goldman Sachs Group, for instance, implemented its own carried interest program last year for CEO David Solomon and other senior executives, reducing cash compensation in favor of aligning leaders with the firm’s alternatives initiatives. Like BlackRock, Goldman’s program includes forfeiture and clawback provisions for those who join competitors. This widespread adoption of private equity-style compensation underscores a fundamental recognition across the financial industry: to compete effectively in the burgeoning alternatives market, firms must offer competitive incentives that align executive interests directly with the long-term performance of these specialized funds. As Steven Kaplan, professor of finance at the University of Chicago Booth School of Business, points out, “If you don’t pay your really good people, then they leave. That’s the worst thing.”
