carried interest

Carried interest is a share of the profits that investment fund managers earn from the investments they manage, typically private equity or hedge funds. It allows these managers to benefit financially from the success of the fund they oversee. Generally, after investors receive their initial investment back plus a set return, the remaining profits are split, with a portion going to the fund managers (the "carried interest"). This compensation mechanism aligns the interests of managers with those of investors, encouraging managers to maximize the fund's performance. It is often subject to different tax treatment than regular income.