Carried Interest Calculator
From total fund profit and the carry rate, compute the general partner's (GP) performance fee (carried interest).
Input Data
Results
At a glance:Carried interest ('carry') is the GP's performance fee from a fund's profit: carried interest = total profit x carry rate. The norm is '2 and 20' (2% management fee + 20% carry). Unlike the management fee (charged on assets regardless of results), carry is earned only when the fund actually profits, aligning GP and LP interests. WARNING: This simplest model ignores the hurdle rate (LPs must first recover capital + a minimum return, e.g. 8%, before GP carry starts), catch-up, fees and tax. Hong Kong has tax concessions for qualifying carried interest, but the rules are strict — seek professional advice. For education, not advice.
Formula
Carried interest = total fund profit x carry rate.
$$$Carry = Profit \\times r_{carry}$$$$$$Profit$ $r_{carry}$ ( 20%)$$$$$10{,}000{,}000 \\times 20\\% = 2{,}000{,}000$$$How to Use
- Enter the fund's total profit for the period.
- Enter the agreed carry rate (~20% norm).
- View the GP's carried interest.
FAQ
What is carried interest?
It is the share of a fund's investment profit paid to the manager (GP) as a performance reward — slang 'carry'. Different from the management fee (charged on assets yearly, paid win or lose), carry is earned only when the fund profits. The classic '2 and 20' means 2% management fee plus 20% carry. It aligns the manager with investors: the more the fund earns, the more carry the manager gets.
Why is real carry usually less than this result?
Because most fund documents include a hurdle rate (preferred return): LPs must first get their capital back and a minimum annual return (often 8%) before the GP earns carry. So carry applies only to profit above the hurdle, not all profit. A catch-up clause may also adjust the split. This tool uses the basic 'total profit x rate' for a quick estimate; real carry per the LPA is usually lower.
How is carried interest taxed in Hong Kong?
Carried interest taxation is a specialised, jurisdiction-specific topic. Hong Kong offers tax concessions for qualifying carried interest (eligible funds and carried interest may enjoy a preferential profits-tax rate or exemption), but the eligibility, fund structure and where management activities take place are strictly defined. Whether you qualify and how to report involves complex tax and legal judgement. This tool estimates only the amount, not tax. For any fund setup, profit split or tax planning, consult a Hong Kong tax-aware accountant and solicitor and follow the IRD's latest guidance.
What are GP and LP, and how is carry split?
In the typical limited partnership: the GP (general partner) is the fund manager — raises capital, makes investment decisions, runs operations, with unlimited liability; the LP (limited partner) is the investor — provides most capital, no daily management, liability limited to contribution. Profit split: LPs get most profit by contribution (after any hurdle), and the GP gets the agreed carry (~20%) as performance reward. Example: HK$50m profit, 20% carry → GP HK$10m, LPs HK$40m.
Is the carry rate always 20%?
20% is the common norm, not a rule. The actual rate is set in the LPA and varies by fund type, size, strategy, manager track record and negotiation. Top managers may get 25-30%; competitive or institution-led funds may be below 20%. This tool lets you enter the contract rate to estimate the carried interest.
Related Tools
References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.