carried interest: meaning, definition, pronunciation and examples
C2Formal, Technical
Quick answer
What does “carried interest” mean?
A share of the profits earned by private equity and hedge fund managers, typically as compensation for managing the fund.
Audio
Pronunciation
Definition
Meaning and Definition
A share of the profits earned by private equity and hedge fund managers, typically as compensation for managing the fund.
A financial arrangement where investment managers receive a portion of the fund's profits (usually 20%) after returning the initial capital to investors, aligning their compensation with fund performance.
Dialectal Variation
British vs American Usage
Differences
Term is identical in meaning and spelling; however, legal structures and tax treatment may differ between jurisdictions.
Connotations
Both regions associate it with high finance, private equity, and significant compensation; sometimes viewed critically as 'performance fee'.
Frequency
Equally common in UK and US financial sectors; slightly more prevalent in US due to larger private equity market.
Grammar
How to Use “carried interest” in a Sentence
[Subject: Fund manager] + receives/earns/is entitled to + carried interest + [from fund][Carried interest] + is + calculated/paid/distributed + [based on profits][Investors] + agree to + carried interest + [for the manager]Vocabulary
Collocations
Examples
Examples of “carried interest” in a Sentence
verb
British English
- The partners will carry interest according to the agreement.
American English
- The fund managers carried interest based on the fund's performance.
adjective
British English
- The carried-interest provision was carefully negotiated.
American English
- They discussed the carried-interest tax treatment.
Usage
Meaning in Context
Business
Common in finance, private equity, venture capital, and hedge fund discussions about compensation structures.
Academic
Used in finance, economics, and business law papers analysing alternative investment vehicles.
Everyday
Rarely used outside financial news or discussions about wealth inequality.
Technical
Precise term in fund partnership agreements, tax law, and investment management regulations.
Vocabulary
Synonyms of “carried interest”
Strong
Neutral
Weak
Vocabulary
Antonyms of “carried interest”
Watch out
Common Mistakes When Using “carried interest”
- Using 'carried interest' to mean 'continued interest' (e.g., 'he carried interest in the topic').
- Spelling as 'carried intrest'.
- Confusing with 'carryover interest' or 'accrued interest'.
- Assuming it applies to any profit-sharing, rather than specific investment fund context.
FAQ
Frequently Asked Questions
No, it is a performance-based share of profits, not a fixed salary.
Historically, it refers to the fund manager 'carrying' or bearing a share of the profits alongside investors.
In some jurisdictions like the US, it has been taxed at lower capital gains rates, which is a subject of political debate.
Typically the general partners or investment managers of private equity, venture capital, or hedge funds.
A share of the profits earned by private equity and hedge fund managers, typically as compensation for managing the fund.
Carried interest is usually formal, technical in register.
Carried interest: in British English it is pronounced /ˈkær.id ˈɪn.trəst/, and in American English it is pronounced /ˈkærid ˈɪntrəst/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “Carry the load (related metaphor for earning one's share)”
- “Skin in the game (related concept of having personal investment)”
Learning
Memory Aids
Mnemonic
Imagine a fund manager CARRYING a heavy bag of INTEREST (profits) they've earned for investors, and keeping a portion as their fee.
Conceptual Metaphor
PROFIT IS A BURDEN TO BE CARRIED (and shared).
Practice
Quiz
What is 'carried interest' primarily associated with?