Carried Interest Calculator

Enter Calculation

Total Fund Return ($)

Invested Capital ($)

Carry Rate (%)

Hurdle Rate (%)

Results

Carried Interest (GP Share)

$840,000

paid to the general partner

Total Profit	$5,000,000
Hurdle (Preferred Return)	$800,000
Profit Above Hurdle	$4,200,000
LP Net Share	$4,160,000

What Is Carried Interest?

Carried interest, or "carry," is the share of a fund's profits paid to the general partner (GP) of a private equity, venture capital or hedge fund as performance compensation. A typical structure is "2 and 20" — a 2% management fee plus 20% carried interest. Carry is usually only earned on profit above a hurdle rate (preferred return) that limited partners (LPs) must receive first.

How to Use This Calculator

Enter the total amount the fund returned, the capital that was invested, the carry rate (often 20%) and the hurdle rate (often 8%). The calculator computes total profit, the hurdle owed to LPs, the profit above that hurdle, and the carried interest the GP keeps.

The Formula Explained

First, profit equals total return minus invested capital. The hurdle profit is the invested capital multiplied by the hurdle rate. The profit above the hurdle is profit minus hurdle profit (floored at zero). Carried interest is the carry rate times that excess: \(CI = \text{CarryRate} \times (\text{Profit} - \text{HurdleProfit})\). The LP net share is total profit minus the carried interest.

$$ C = \frac{\text{Carry Rate (\%)}}{100} \times \max\!\left(0,\; P - H\right) $$ $$ \text{where}\quad \left\{ \begin{aligned} P &= \text{Total Fund Return} - \text{Invested Capital} \\ H &= \text{Invested Capital} \times \dfrac{\text{Hurdle Rate (\%)}}{100} \end{aligned} \right. $$

Carried interest is the GP's share of profit earned above the preferred-return hurdle.

Worked Example

A fund returns $15,000,000 on $10,000,000 of invested capital, with a 20% carry and an 8% hurdle. Profit is $5,000,000. The hurdle is \(8\% \times \$10{,}000{,}000 = \$800{,}000\). Profit above the hurdle is \(\$5{,}000{,}000 - \$800{,}000 = \$4{,}200{,}000\). Carried interest is \(20\% \times \$4{,}200{,}000 =\) $840,000, and the LPs keep $4,160,000.

Distribution waterfall: capital is returned first, then the hurdle, then profit is split with carry.

FAQ

What if profit is below the hurdle? No carry is earned — the calculator returns $0 carried interest.

Is this a "hard" or "soft" hurdle? This model uses a hard hurdle: carry applies only to profit above the hurdle. Many real funds use a soft hurdle with catch-up provisions.

Does this include management fees? No. This tool isolates performance-based carried interest only.