HesapHanem

Carried Interest Calculator

Enter committed capital, fund profit, hurdle rate, and carry rate.

How it is calculated

The tool applies a simple hurdle-then-carry rule. First hurdle amount = committed × hurdle% ÷ 100. Then profit above hurdle = max(0, profit − hurdle amount), and carried interest = profit above hurdle × carry% ÷ 100. The investors' (LP) profit is profit − carried interest. Committed capital and profit are currency amounts, while hurdle and carry are percentage numbers, so 8 means 8%. Profit means gain above returned capital. If profit does not exceed the hurdle, carry is zero. This is a hard hurdle with no catch-up: the manager is paid only on profit beyond the hurdle, and the hurdle is applied once, not compounded year by year. Real fund agreements can differ in all of these points. No value may be negative.

Worked example

A fund has 50,000,000 committed, produced 18,000,000 of profit, and its terms are an 8% hurdle and 20% carry. Hurdle amount = 50,000,000 × 8% = 4,000,000. Profit above the hurdle = 18,000,000 − 4,000,000 = 14,000,000. Carried interest = 14,000,000 × 20% = $2,800,000.00. Investors keep 18,000,000 − 2,800,000 = $15,200,000.00. Had profit been only 3,000,000, it would be below the 4,000,000 hurdle and carry would be $0.00.

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Common mistakes

  • Applying the carry to total profit. This tool charges it only on the profit above the hurdle, so 20% of 18,000,000 (3,600,000) overstates the carry by 800,000 compared with the result here.
  • Entering the hurdle as a decimal such as 0.08. The field expects a percentage number, so 8 is correct and 0.08 would be read as 0.08%.
  • Entering total fund value instead of profit. The profit field is the gain above returned capital, not the capital plus gain.
  • Assuming the tool models a catch-up clause or a multi-year compounding hurdle. It does not, so for a fund with these terms the real payout can be higher for the manager.

Sources

About this calculator

Carried interest follows the private-equity and venture-capital "waterfall" structure: limited partners first get their capital back, then a preferred return (hurdle rate) — commonly 8% annually — before the general partner earns anything. Above that hurdle, the fund manager's carry (typically 20%) applies to the remaining profit, with investors keeping the rest, so a manager only shares in the upside once the fund has cleared its hurdle for LPs.

Private equity and venture capital fund managers (GPs) use this to model how much carry a given fund performance would generate, and limited partners and institutional investors use the same math to check that a fund's economics — hurdle, catch-up, and carry split — are structured the way the fund's terms describe before committing capital.

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