How does carry work for funds?

Carry, also known as carried interest, is the share of the profits that the fund lead receives when investments have a positive return. After investors receive all of their invested capital back, the fund lead retains a portion (typically 20%) of the distributions.

This is in addition to a management fee (which varies by fund, but is typically 2% of the fund's total amount), which is used to cover operating expenses and pay salaries.

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