Carried Interest
The performance-based share of fund profits paid to the general partner, typically calculated after LPs have received their invested capital and a preferred return.
Carried Interest explained
Carried interest is the share of fund profits allocated to the general partner once agreed thresholds are met. It is the primary alignment mechanism between manager and investors. Its economics depend on the hurdle, the catch up, whether it is calculated whole fund or deal by deal, and whether a clawback applies.
How it works in practice
- Carry terms are encoded alongside the waterfall they depend on.
- Allocation among the manager's team is documented separately from the fund terms.
- Accrued and paid carry are tracked with clawback exposure visible.
Common mistake
Reporting accrued carry without the clawback position, which overstates what the manager will retain.
Why it matters in private capital
Carried Interest sits inside a chain of decisions that runs from sourcing through diligence, investment committee, portfolio monitoring and LP reporting. When each stage lives in a different tool, the evidence behind the decision is rebuilt at every handover. Keeping the concept on one record is what makes the fund able to explain, not just report, what it did.
How Reuben AI handles Carried Interest
Reuben AI is one platform for the full private capital workflow. Deal intake and screening at /deal-flow-management, diligence and IC memos at /ic-memo-software, portfolio monitoring and LP reporting at /lp-reporting-software all read from the same record, so Carried Interest does not need to be re-entered per tool. Pricing is at /pricing.
Frequently asked questions
What is Carried Interest?
The performance-based share of fund profits paid to the general partner, typically calculated after LPs have received their invested capital and a preferred return.
How does Carried Interest work in practice?
Carried interest is the share of fund profits allocated to the general partner once agreed thresholds are met. It is the primary alignment mechanism between manager and investors. Its economics depend on the hurdle, the catch up, whether it is calculated whole fund or deal by deal, and whether a clawback applies.
What is the most common mistake with Carried Interest?
Reporting accrued carry without the clawback position, which overstates what the manager will retain.
How does Reuben AI handle Carried Interest?
Reuben AI keeps Carried Interest on the same record as sourcing, diligence, investment committee, portfolio monitoring and LP reporting, so the underlying evidence does not have to be rebuilt for each workflow.
Related terms
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