Asset management and funds
Carried interest (carry)
The general partner's share of a fund's profits, usually 20 percent.
Facts checked against sources onWhat does Carried interest (carry) mean?
Carried interest is the share of a fund's profits paid to the general partner as a reward for performance, commonly 20 percent. It is usually paid only after limited partners have received their money back plus a minimum return called the hurdle rate. Example: a fund invests 100 and returns 200, a profit of 100. With a 20 percent carry and a full catch-up, the GP gets 20 and the LPs get 180 in total (their 100 back plus 80 of profit). Carry is paid on realized gains, and it is what makes a GP rich when a fund does well. How it is taxed is a long-running policy debate in several countries.
Where does it come up in case interview prep?
Related terms
- Hurdle rateThe minimum return a project or fund must beat before it counts as worth doing.
- General partner (GP)The firm that raises and runs a private equity or venture fund.
- Limited partner (LP)An investor that puts money into a private equity or venture fund.
- MOIC (multiple on invested capital)How many times the money invested comes back.
- Assets under management (AUM)The total market value of the money a firm manages for clients.
- Net flows (net new money)New client money coming in minus money taken out.
- Active versus passive investingTrying to beat the market versus simply tracking it at low cost.
- Sovereign wealth fund (SWF)A state-owned investment fund, often built from oil revenues or reserves.
Learn it in context
See Carried interest (carry) at work in a lesson from The same acumen in other roles, with checks as you go.
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