Calculate carried interest (carry) for private equity, venture capital, and hedge funds. Model GP/LP distributions with hurdle rates, catch-up, and waterfall structures.
Carried interest (or "carry") is the share of investment profits that fund managers (General Partners) receive as compensation for generating returns above a specified threshold. Typically structured as 20% of profits above a hurdle rate, carry aligns GP and LP interests by rewarding performance.
The mechanics of carry involve multiple layers: the hurdle rate (preferred return to LPs), catch-up provisions (allowing the GP to "catch up" to their target share), and the profit-sharing split above that. European (whole-fund) and American (deal-by-deal) waterfall structures determine when carry is calculated and distributed.
This calculator models the complete carry waterfall for any fund structure. Enter fund size, carry percentage, hurdle rate, catch-up provision, management fees, hold period, and exit multiple to see how profits are distributed between GPs and LPs. The sensitivity table shows how carry changes across different exit multiples — essential for both fund managers structuring terms and investors evaluating fund economics.
Carry economics are complex and easily misunderstood. This calculator demystifies the waterfall by showing exactly how much GPs earn vs what LPs receive at various return levels. Whether you are negotiating fund terms, evaluating a co-invest opportunity, or studying fund economics, this tool provides clarity on the most critical component of fund compensation.
Hurdle Amount = Fund Size × [(1 + Hurdle Rate)^Years − 1]. Profits above hurdle are split: GP receives Carry% after catch-up provisions. LP Return = Exit Value − GP Carry. LP MOIC = LP Return / Fund Size. LP IRR ≈ (LP Return / Fund Size)^(1/Years) − 1.
Result: GP carry: ~$28.5M — LP return: $271.5M (2.71× MOIC) — LP IRR: ~15.3%
A $100M fund returning 3× over 7 years generates $200M in profit. The 8% hurdle over 7 years is $71.4M. Remaining $128.6M is split 20/80 after catch-up, yielding approximately $28.5M in carry for the GP. LPs receive $271.5M back on their $100M investment.
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Carried interest is the GP's share of investment profits, typically 20%. It is performance-based — GPs only earn carry when returns exceed the hurdle rate. It aligns GP incentives with LP returns.
The hurdle rate (preferred return) is the minimum annual return LPs must receive before the GP earns any carry. Typically 8% for PE/VC funds. It ensures GPs are compensated only for above-market performance.
After hitting the hurdle, the catch-up allows the GP to receive a higher share of profits until they "catch up" to their target carry percentage of total profits. A 100% catch-up means the GP gets 100% of profits in the catch-up tier.
European (whole-fund) waterfalls calculate carry on aggregate fund performance — losses offset gains. American (deal-by-deal) waterfalls calculate carry per investment, potentially allowing carry on winners even if the fund overall underperforms. European is more LP-friendly.
In the US, carry is generally taxed as long-term capital gains (currently 20%) rather than ordinary income (up to 37%), provided investments are held 3+ years. This favorable tax treatment has been politically debated.
The standard is "2 and 20" — 2% annual management fee on committed capital plus 20% carry on profits above an 8% hurdle. Top-performing funds may charge 2.5/25 or even 3/30. Emerging managers sometimes offer 1.5/15 to attract LPs.