Carried Interest Calculator

Model the private equity profit waterfall: the preferred return paid to limited partners, the general partner's catch-up, and the final carry split, to find the GP's carried interest and the LP's total distribution.

Quick Facts

Waterfall order
Return of capital → preferred return → GP catch-up → carry split
Carried interest is only paid after LPs clear the preferred return.
Typical terms
20% carry with an 8% hurdle
The most common structure in private equity and venture capital funds.

Your Results

Calculated
Carried interest (GP)
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Total profit share paid to the GP
LP total distribution
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Return of capital plus LP's profit share
LP preferred return
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Hurdle amount paid to LPs first
Effective GP carry rate
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GP share of total profit

Ready

Enter invested capital, exit value, hurdle rate, holding period, and carry rate, then press Calculate.

How the Carried Interest Calculator works

Carried interest — "carry" — is the share of a private equity, venture capital, or hedge fund's profit that the general partner (GP) earns for managing the fund, on top of any management fee. It is only paid after limited partners (LPs) have gotten their capital back and cleared a preferred return, so the GP's payout is directly tied to how much profit the deal actually produced. This calculator walks a single investment through the standard distribution waterfall used across the industry.

The waterfall, step by step

  1. Return of capital. LPs get their invested capital back first, before any profit is split.
  2. Preferred return (hurdle). LPs then receive a preferred return — commonly 6-10% per year — compounded on invested capital over the holding period: Hurdle amount = Capital × ((1 + hurdle rate)^years − 1). No carry is paid until this is covered.
  3. GP catch-up. If the fund uses a catch-up clause, the GP receives most or all of the next tranche of profit until its cumulative take equals the carry rate applied to everything distributed so far (the preferred return plus the catch-up itself). A full 100% catch-up that completes brings the GP to exactly its stated carry percentage of total profit.
  4. Carry split. Any profit left after the catch-up is split by the carry rate — typically 80% to LPs and 20% to the GP, the industry-standard "2 and 20" carry.

Worked example

$10,000,000 invested, exited five years later for $25,000,000, with an 8% hurdle, 20% carry, and a full 100% catch-up. Total profit is $15,000,000. The compounded preferred return target is 10,000,000 × (1.08^5 − 1) ≈ $4,693,281, which LPs receive first. The GP catch-up tranche is roughly $1,173,320, after which the remaining $9,133,399 splits 80/20. The GP's total carried interest comes out to exactly $3,000,000 — 20% of the full $15,000,000 profit, which is what a completed 100% catch-up is designed to produce. LPs receive their $10,000,000 capital back plus $12,000,000 of profit, for a $22,000,000 total distribution.

What moves the GP's carry the most

  • Whether the hurdle is cleared. If profit doesn't cover the preferred return, the GP earns no carried interest on that exit at all — carry is entirely contingent on performance.
  • The catch-up terms. A full 100% catch-up (once it completes) always lands the GP at exactly the stated carry rate on total profit. A partial or absent catch-up leaves the GP with less, since carry then only applies to profit above the hurdle.
  • The carry rate and hurdle rate together. A higher hurdle protects LPs longer before any carry is owed; a higher carry rate increases the GP's share of whatever profit clears that hurdle.

Assumptions and limits

This tool models a single capital contribution and a single exit with an annually compounded hurdle — the simplified case used to teach and estimate carry. Real fund waterfalls track many capital calls and distributions over time, may apply carry at the fund level or the deal level, and typically net out management fees and fund expenses before computing profit. Treat the result as a directional estimate of how a carry structure behaves, not as an actual fund's distribution statement.

Frequently Asked Questions

How is carried interest calculated?
Carried interest is the general partner's share of fund profit after limited partners clear a preferred return (hurdle). Profit is exit value minus invested capital. The preferred return target is invested capital compounded at the hurdle rate over the holding period. LPs receive that amount first, then an optional GP catch-up tranche brings the GP toward its full carry percentage of total profit, and any remaining profit is split by the carry rate (commonly 20% to the GP, 80% to LPs).
What is a GP catch-up and why does it matter?
After LPs receive their preferred return, a catch-up clause lets the GP receive most or all of the next slice of profit until the GP has effectively earned its full carry percentage on all profit distributed so far, not just profit above the hurdle. With a 100% catch-up that completes, the GP ends up with exactly the stated carry rate (e.g. 20%) of total profit. Without a catch-up, the GP only ever earns carry on profit above the hurdle, which lowers its effective share.
What happens if the exit value does not clear the hurdle?
If total profit is less than the preferred return target, LPs receive whatever profit exists as their preferred return and the GP earns no carried interest on that exit. Carried interest only begins once the preferred return has been paid in full.
Is this a real fund waterfall or a simplification?
This models a simplified single-investment, single-exit European waterfall: one capital contribution, one exit, and an annually compounded hurdle. Real fund waterfalls handle multiple capital calls and distributions over time, management fees, and fund-level versus deal-level carry, so treat this as a directional estimate rather than a fund's actual distribution schedule.

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