Carried interest

CFA Level I Glossary

Carried interest is the general partner’s performance share of private-fund profits, typically after LPs get capital back and a preferred return. It aligns GP upside with fund performance, but timing depends on the waterfall design. American and European waterfalls change when carry is paid and how clawbacks may apply later. Candidates often confuse carry with the management fee, which is usually a recurring fee on committed or invested capital.

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