Glossary
Carried Interest
Carried Interest is the performance-based share of profits received by the General Partner from a fund's realised gains, typically 20 per cent of profits above an agreed minimum return (the hurdle rate). It arises only on actual gains generated after repayment of invested capital.
At a glance
- Carried Interest is linked to a hurdle rate; the General Partner participates in gains only after this threshold is exceeded.
- The mechanism is intended to align the interests of General and Limited Partners.
- Carried Interest is not guaranteed and arises only upon successful realisations.
Frequently asked questions
Generally, no. Carried Interest typically arises only after investors have received their full invested capital back and the agreed minimum return has been exceeded. Many fund structures also include a clawback mechanism that can recover previously paid carry from the manager.
