How Carried Interest and Management Fees Work
An overview into the two ways fund managers are typically compensated.
Fund managers are usually compensated two ways: a management fee and carried interest. A classic structure is a 2 and 20 structure — a 2% annual management fee and a 20% carry — though terms vary widely.
Management fee: An annual percentage of committed or investment capital that funds the manager's operations.
Carried Interest: The manager's share of the fund's profits, often paid only after LPs get their capital back ( and sometimes a preferred return or hurdle). For SPVs, carry is typically set per deal. PaperOS can issue carry unites to managers.
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GP, LP, SPV, RUV, carry, management fee, capital call, and K-1
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