Carried interest – typically 20% of profits – is how fund managers are mainly paid, on top of a management fee. A hurdle (often 8%) means investors get their preferred return before the GP earns any carry; a catch-up then lets the GP reach its full 20% share.
How to use the Carried Interest Calculator
- Initial fund value (capital committed)
- Final fund value
- Holding period
- Hurdle rate
- Carried interest
- GP catch-up
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the initial and final fund values, the holding period, the hurdle rate, the carry percentage and whether there is a GP catch-up.
Tips
- Take figures from the same financial statements and the same fiscal year.
- Compare ratios with companies in the same industry, not across industries.
- Use several valuation measures together; no single ratio tells the whole story.
- Market prices change every second – refresh the share price before you rely on a result.
Common mistakes to avoid
- Mixing per-share figures with company totals.
- Using trailing earnings for one company and forward earnings for another.
- Forgetting dilution from options and convertible securities.
Inputs explained
| Field | What to enter |
|---|---|
| Initial fund value (capital committed) | Amount in your currency |
| Final fund value | Amount in your currency |
| Holding period | In years |
| Hurdle rate | In % |
| Carried interest | In % |
| GP catch-up | Choose one: Yes (100% catch-up), No |
What each result means
- Fund profit = [Final fund value] – [Initial fund value (capital committed)]
- Fund return = [Fund profit]÷[Initial fund value (capital committed)]×100
- Preferred return to investors = [Initial fund value (capital committed)]×((1 + [Hurdle rate]÷100)^[Holding period] – 1)
- Profit to limited partners = [Fund profit] – [Carried interest to the GP]
- LP net annual return = ((([Initial fund value (capital committed)] + [Profit to limited partners])÷[Initial fund value (capital committed)])^(1÷[Holding period]) – 1)×100
Example values
How the main result changes when Initial fund value changes and everything else stays at the example values above:
| Initial fund value (capital committed) | Carried interest to the GP |
|---|---|
| 5,000,000 | 3,000,000 |
| 7,500,000 | 2,500,000 |
| 10,000,000 | 2,000,000 |
| 12,500,000 | 1,500,000 |
| 15,000,000 | 0 |
| 20,000,000 | 0 |
Formula
Profit = final fund value − initial fund valuePreferred return = initial × [(1 + hurdle)^years − 1]With full catch-up: carry = carry % × profit once profit is large enough; without: carry = carry % × (profit − preferred return)Worked example
Inputs — Initial fund value (capital committed): $10,000,000; Final fund value: $20,000,000; Holding period: 5 years; Hurdle rate: 8 %; Carried interest: 20 %; GP catch-up: Yes (100% catch-up).
Results — Fund profit = $10,000,000.00; Fund return = 100 %; Preferred return to investors = $4,693,280.77; Carried interest to the GP = $2,000,000.00; Profit to limited partners = $8,000,000.00; LP net annual return = 12.47 %.
Frequently asked questions
What is carried interest?
The general partner's share of a fund's profits, usually 20%.
What is a hurdle rate?
The minimum return investors must receive before the GP earns carry.
What does catch-up mean?
After the hurdle, the GP receives most or all profits until it has its full carry share.
What formula does the Carried Interest Calculator use?
Profit = final fund value − initial fund value.