Carried interest is a share of the fund’s profits that is distributed to the General Partner and Investment Manager. This is typically charged as 20% of the proceeds from aggregate exits or successful exits and represents the main incentive for the decision-makers regarding the performance of the fund.

The fund will return the capital to investors (including or excluding certain fees) and will then distribute a minimum return (hurdle rate) of typically 5-8% before it starts paying carried interest.