What is Carried Interest?

Carried interest generally refers to a share of the profits which arise to managers of the fund where the investments in the fund perform above a certain level. This form of remuneration is common within the private equity industry and is awarded in addition to any salary or bonus which the fund manager may be entitled to. Sometimes carried interest is allocated in terms of units or percentages. They are often subject to a vesting schedule. Carried interest tends to have tax advantages over other forms of remuneration. It is often allocated via funds set up by LLPs of which the recipient of the carried interest is a member.

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