1. What is Interest Carry?

Interest Carry represents the share of profits that investment managers receive based on the difference between committed and invested capital, multiplied by the agreed carry rate.

2. How Does the Calculator Work?

The calculator uses the Interest Carry formula:

Where:

• \( Committed \) — Total capital committed by investors (USD)
• \( Invested \) — Capital actually invested (USD)
• \( Carry Rate \) — Agreed percentage of profits (as decimal)

Explanation: The equation calculates the manager's share of profits based on uninvested capital.

3. Importance of Carry Calculation

Details: Accurate carry calculation is crucial for fair profit distribution between investors and fund managers, and for understanding investment performance.

4. Using the Calculator

Tips: Enter committed and invested amounts in USD, and carry rate as a decimal (e.g., 0.20 for 20%). All values must be valid (non-negative, carry rate between 0-1).

5. Frequently Asked Questions (FAQ)

Q1: What's typical carry rate in private equity?
A: Typically 20% (0.20), but can range from 10-30% depending on fund size and strategy.

Q2: When is carry usually paid out?
A: Typically after returning invested capital plus preferred return to investors (hurdle rate).

Q3: Is carry taxed differently than regular income?
A: In many jurisdictions, carry is taxed as capital gains rather than ordinary income.

Q4: What's the difference between committed and invested capital?
A: Committed is the total promised by investors; invested is what's actually deployed.

Q5: Can carry be negative?
A: No, carry represents a share of profits, so it's always non-negative.