Carried Interest: The Ultimate Alignment Tool

and How to See Through the Hype

Let’s talk about the engine of private market compensation: carried interest (or simply, “carry”). It’s the 20% (or sometimes 25%) of profits that General Partners (GPs) take after returning our capital and hitting the hurdle rate. We all know the basic math: 2-and-20. But in sophisticated circles, the conversation isn’t about whether carry exists—it’s about how it works, when it’s paid, and whether the structure truly aligns with our long-term interests.

This isn the GP’s entire economic incentive. Let’s break down what you need to scrutinize.