Carried interest (carry)

Carried interest (“carry”) — the fund manager’s share of investment profits, classically 20% above a hurdle: the “20” in 2-and-20 (2% of assets annually plus 20% of profits). It gives the manager equity-like upside with no capital at risk, typically taxed as capital gains rather than income — which is why fund management mints fortunes faster per capita than almost any other path (pattern #5). The client-side mirror: Tiger 21 members now hold just 2% in hedge funds; the fees built the manager’s fortune, not theirs.

First used in: 5.2 · The ten breakthrough patterns