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Carry or carried interest

What is carry or carried interest?

Carry, or carried interest, refers to the share of profits that a fund manager receives as compensation, regardless of whether they contributed any initial funds. This is a common form of compensation in venture capital and private equity firms, where managers are often rewarded based on the fund's performance.

Carried interest is typically a significant portion of a fund manager's compensation, often around 20% of the fund's profits, but it can vary. This arrangement aligns the fund manager's interests with those of the investors, as the manager only benefits when the investors do. It's important to note that there are ongoing debates and legislative proposals concerning the tax treatment of carried interest.

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