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Carried Interest Calculator

Calculate the carry distribution and carried interest of an investment fund.

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The fund return is:

Total GP carry distribution is:

What is carried interest?

Carried interest is a crucial component of the compensation structure within the private equity and hedge fund industries. It represents a share of the profits earned by investment managers on successful investment ventures. Typically, this interest is calculated as a percentage of the profits generated above a specified hurdle rate, ensuring that managers are incentivized to pursue high-performing investments that yield returns exceeding the expectations of their investors. This performance-based compensation aligns the interests of investment managers with those of their clients, as it encourages managers to make prudent investment decisions that prioritize long-term growth and profitability.

Carried interest plays a pivotal role in attracting top talent to the investment management industry. The prospect of earning significant rewards from successful investment strategies motivates skilled professionals to join private equity firms and hedge funds, fostering an environment of innovation and expertise. Moreover, carried interest serves as a retention tool, incentivizing managers to remain committed to their investment portfolios over the long term, thereby promoting stability and continuity within firms. Ultimately, carried interest enhances the efficiency and effectiveness of investment management practices, driving value creation for investors and contributing to the overall growth and prosperity of the financial markets.

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