hard · Private Credit & Debt fund-structures-returns-economics

Ignoring fund-level expenses and assuming the management fee is paid from loan proceeds, what carried interest does the GP earn on this investment, and why does the catch-up matter here?

1. $0.00, because the $8M of net profit fails to clear the $8M (8%) preferred-return hurdle on $100M of invested capital
2. $0.30M, because after the 100% GP catch-up fully equalizes the GP to 15% of profit above the hurdle, carry is $0.15 × ($8M - $8M) plus catch-up
3. $0.00, because the catch-up only applies once cumulative LP returns exceed the hurdle and net profit of $8M exactly equals the $8M hurdle, leaving nothing to catch up on
4. $1.20M, because the GP takes 15% of the full $8M net profit once the catch-up is triggered, since reaching the hurdle activates the entire profit pool

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