Carried Interest Explained: How Private Equity and VC Investors Really Make Money
Carried interest is one of the most misunderstood concepts in private equity and venture capital. It’s often described vaguely as “profit share,” but that explanation barely scratches the surface. People hear that fund managers earn “carry” and assume it’s some kind of guaranteed bonus. In reality, carried interest determines how investment managers are rewarded, how risk is shared, and why fund structures work the way they do. This guide explains carried interest in simple terms, with real examples, numbers, and context, so you can understand who gets it, how it’s calculated, and why it plays such a big role in private investing.