Carried Interest
Carried interest (or "carry") is the share of investment profits paid to the general partner of a fund as performance compensation, traditionally 20% above a hurdle rate. It is the primary mechanism that aligns GP and LP incentives in private-fund structures.
Family offices encounter carry on the LP side (paying it on fund commitments) and increasingly on the GP side (when family-office investment teams structure carry on their direct-investment activity to retain talent). Carry tax treatment varies sharply by jurisdiction and is the subject of ongoing political debate, particularly in the US and UK.
Negotiating carry — both the rate and the hurdle — is a meaningful lever for family offices with anchor-LP positioning. Co-investment terms typically reduce or eliminate carry on the co-invest portion.
Related terms
Deeper reading
Family office asset allocation benchmarks: how $50M, $500M and $2B portfolios differ
Family offices at $50M allocate 47% to public equity; those above $1B drop to 28% and triple alternatives. We analyse structural drivers, institutional comparisons, and policy ranges across three AUM tiers.
Direct investing for family offices: a due diligence framework from sourcing to exit
A comprehensive framework for family offices conducting direct investments: sourcing methodologies, four-stage due diligence, team sizing by AUM, term negotiation, board governance, and exit discipline with jurisdiction-specific considerations.
Direct Investing vs Fund Allocation: A Decision Framework for Family Offices
Three operating-model questions decide whether direct investing or fund allocation is the more honest answer for a given family office. The wrong choice is rarely loud — it just compounds slowly.
Stay informed
Weekly insights for family office professionals.
No spam. Unsubscribe anytime.