Carried interest or carry is the share of the profits of an investment received by the investment manager over the amount contributed to the partnership in private equity and hedge funds as well. The manager receives the interest upon a successful exit from an investment. It gets counted as the performance fee rewarded to the manager for improving performance.

In the private equity industry, the standard carried interest rate is 20 percent for funds making buyout and venture investments. However, certain big shots like Bain Capital provide 25 to 30 percent of carried interest.

How does the manager or general partner receive carried interest?