Private equity executives in Europe are increasingly seeking to borrow against their anticipated future earnings from carried interest as delays in deal completions extend payout timelines. Between January and mid-June of this year, buyout dealmakers made 459 inquiries to London-based broker Enness Global about loans secured against forecast carried interest payments, a substantial rise from 134 inquiries over the same period last year.

Carried interest represents the share of profits that fund managers receive from successful deals, typically amounting to around 20 percent of returns that exceed a predetermined hurdle rate. While borrowing against unpaid carried interest is not a new practice, brokers and lenders report that demand has surged to record levels amid a market slowdown.

Islay Robinson, founder and CEO of Enness Global, which specialises in mortgage and lending services for high-net-worth individuals, noted that lenders have seen a significant increase in transactions, closing two to three deals per month this year compared to fewer in prior years. Robinson attributed this to longer holding periods for portfolio companies, with Bain & Company data showing average hold times rising to about seven years from the previous five to six years.

This extension in holding periods is a direct consequence of a private equity downturn that began in 2022, triggered largely by rising interest rates. Higher rates have dampened deal activity by making it harder for firms to sell investments at attractive valuations. The resulting delays have affected fundraising efforts and led several dealmakers to reconsider their career paths in favor of roles with more predictable compensation structures.

In Europe, managers typically receive carried interest only after sufficient deals are realized to push the entire fund past its hurdle rate, contrasting with the U.S. model where payments can be received for each individual deal that exceeds the threshold. Executives can borrow against carried interest projected based on current fund valuations, with private banks such as UBS, Citigroup, and Deutsche Bank reportedly offering such financing.

Enness Global explained that loans secured solely against forecast carried interest mean lenders generally cannot seize the borrower’s personal assets if the anticipated profits do not materialize. However, some lenders reportedly base their decisions on a client’s broader financial situation, including income diversification and historical fund performance, applying conservative assumptions and rigorous due diligence.

Representatives from UBS, Citi, and Deutsche Bank declined to comment on their lending practices. Meanwhile, the rise in borrowing against future profits reflects how private equity executives are adjusting to an environment of prolonged investment cycles and uncertainty over payout timing.