Carried Interest Calculator

$
$
%/yr
LPs get this minimum return before carry kicks in.
%
years
Used to compound the hurdle rate.
Finance

Calculate the carried interest (carry) that a private equity or venture capital fund manager earns. Carry is typically 20% of the fund's profits above a hurdle rate (often 8%). Enter the fund's total gain, the hurdle rate, and the carry percentage to see the manager's share.

Formula

Carry = (Total Gain − Hurdle Amount) × Carry % Hurdle Amount = Fund Size × ((1 + Hurdle Rate)^Years − 1)
  • Carried interest is the fund manager's (GP's) share of profits, typically 20% of gains above a preferred return.
  • The hurdle (preferred return) ensures LPs earn a minimum return before the GP takes carry. Common hurdles are 7–8% compounded annually.
  • Profit above the hurdle = total gain − hurdle amount. The GP's carry = that excess × carry percentage (often 20%).
  • LPs get the rest of the profit. Their net return = total gain − carry.
  • Some funds use a 'catch-up' provision allowing the GP to take more than 20% of the next slice until reaching an 80/20 split on all profits above the hurdle.

$100M fund → $150M, 8% hurdle, 20% carry, 7 years

Inputs
  • Fund Size (Committed Capital): 100000000 $
  • Total Fund Value (at exit): 150000000 $
  • Hurdle Rate (Preferred Return): 8 %/yr
  • Carried Interest %: 20 %
  • Fund Life: 7 years

Total gain = $50M. Hurdle = $100M × ((1.08^7)−1) ≈ $71.4M. Gain < hurdle, so no profit above hurdle → carry = $0. LPs get all the profit. (If totalValue were higher, say $180M, then gain=$80M, profit above hurdle=$8.6M, carry=20%×$8.6M=$1.7M.)

Frequently asked questions

What is carried interest?
It's the share of a fund's profits that the fund manager (GP) earns as performance compensation, typically 20% of profits above a hurdle rate. It's the 'carry' in the '2 and 20' fee model (2% management fee, 20% carry).
What is a hurdle rate?
A minimum return (e.g. 8% per year) that LPs must earn before the GP takes any carry. It protects LPs from paying performance fees on mediocre returns.
What does 'catch-up' mean?
After the hurdle is met, the GP may take 100% of the next slice of profit until reaching an 80/20 overall split. This calculator uses a simple model without catch-up.
Do all PE funds use 20% carry?
Most do, but top-tier funds may negotiate higher (25–30%), and some funds use lower carry (10–15%) if the hurdle is low or absent.
When is carry actually paid?
Usually at exit (when the fund sells a portfolio company) or at fund liquidation. Some funds distribute carry on a deal-by-deal basis; others use fund-level accounting.