How does carried interest work for Rolling Funds?

Carried interest payment is calculated across a Limited Partner’s subscription period. The subscription period is the number of quarters to which a Limited Partner subscribes in advance. Depending on the options provided by the fund manager, a Limited Partner may have a quarter-by-quarter subscription period or a multi-quarter subscription period. 

If on a quarter-by-quarter subscription period, the Limited Partner must be repaid only the amount they contributed to the quarterly fund experiencing the exit before that Limited Partner begins to pay carried interest. 

If on a multi-quarter subscription period, the Limited Partner must be repaid the total amount they contributed to all quarterly funds within that subscription period before that Limited Partner begins to pay carried interest. 

For example: A Limited Partner has a quarter-by-quarter subscription period and has contributed $10,000 to three separate quarterly funds, for a total of $30k contributed to the Rolling Fund program. If the first quarterly fund has an exit, the LP will begin paying carried interest after being repaid only the $10,000 they contributed to that particular quarterly fund. 

In contrast, if that Limited Partner had a three-quarter subscription period, they would need to be repaid the full $30,000 that they had contributed over that subscription period before paying any carried interest.

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