What is Hedege Fund “Carried Interest”?

What it is – How it works?

[By staff reporters]

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Carried interest or carry, in finance, specifically in alternative investments (i.e., private equity and hedge funds), is a share of the profits of an investment or investment fund that is paid to the investment manager in excess of the amount that the manager contributes to the partnership.
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As a practical matter, it is a form of performance fee that rewards the manager for enhancing performance.
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Tax Status

Carried interest, income flowing to the general partner of a private investment fund, often is treated as capital gains for the purposes of taxation.

Some view this tax preference as an unfair, market-distorting loophole.

Others argue that it is consistent with the tax treatment of other entrepreneurial income.

MORE: News about Carried Interest Tax Break

Assessment

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