Glossary

Carried Interest

Definition

Carried interest refers to a share of the profits earned by a venture capital fund. This share is typically paid to the fund managers as compensation for their investment expertise. It serves as an incentive for fund managers to make successful investments and generate positive returns for the fund's investors.

Frequently Asked Questions

What is the purpose of carried interest?

Carried interest is designed to align the interests of fund managers with those of the fund's investors. By receiving a share of the profits, fund managers are motivated to make wise investment decisions and maximize returns for the fund.

How is carried interest calculated?

The calculation of carried interest can vary depending on the terms of the venture capital fund. It is typically calculated as a percentage of the fund's profits after returning the original investment amount to the investors. The specific percentage is agreed upon in the fund's partnership agreement.

Who receives carried interest?

Carried interest is received by the fund managers or general partners of the venture capital fund. These individuals are responsible for making investment decisions and managing the fund's portfolio.

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