Definition
Carried Interest, often referred to as �carry,� is a share of profits earned by investment fund managers, typically as a performance incentive. It aligns fund managers' interests with those of investors.
Related Services
Common in private equity, venture capital, and hedge fund operations. Professionals design carry structures to attract top talent and motivate performance.
Problem and Application
Criticism of carried interest often revolves around its favorable tax treatment as capital gains rather than ordinary income. For funds, structuring carry effectively is critical to incentivizing managers while maintaining investor trust.
Conclusion
Carry is a vital component of fund management, fostering alignment between managers and investors. Transparent structuring ensures motivation while addressing regulatory and ethical concerns.
