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Carried interest

The manager's share of fund profits, typically paid after a preferred return and a catch-up. The principal performance-based economic in most private funds.

Carried interest — The manager's share of fund profits, typically paid after a preferred return and a catch-up. The principal performance-based economic in most private funds.

Carry is the manager's primary performance-based economic, but it is only paid out through the waterfall after capital return and the preferred return are satisfied — meaning a fund can generate positive absolute returns and still pay no carry at all if it fails to clear its hurdle.

Frequently asked questions

Is carried interest the same as a performance fee?

They describe similar economics — a manager's share of profits — but 'carried interest' is the term used in private equity and venture fund structures, while 'performance fee' is more common in hedge fund terminology.

How is carried interest taxed?

Tax treatment is a genuinely complex, jurisdiction-specific and politically contested area — this is a question for a tax professional, not a general glossary entry.

Nothing on this page is legal, tax, or investment advice. SeRuM is not a registered broker-dealer, not a placement agent, and not an investment adviser.

WaterfallThe order in which distributions are split between investors and the manager, through retu Catch-upA waterfall stage where the manager receives a disproportionate share of profits after the Preferred returnA threshold return investors receive before the manager participates in profits. Also call

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