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Carried Interest
Carry
The share of a fund's profits paid to the managers, typically around 20%.
Detailed explanation
Carry is usually earned only after LPs get back their capital plus a minimum return called the hurdle rate.
Why it matters
It aligns fund managers with investors' returns.
Key points
- Paid after the hurdle.
- Often around 20% of profits.
- Classic structure: '2 and 20'.
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Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.