Carried Interest Explained: How GPs Actually Get Paid

Introduction

The single biggest pay variance among senior PE partners on the same fund is not bonus or co-invest; it is the difference between a European and an American waterfall. A 20 percent carry on a $1 billion fund returning 2.5x gross MOIC ($2.5 billion of total cash distributions, which works out to a 2.2x net MOIC after carry) pays the GP roughly the same nominal $300 million of total carry under either structure. But under American (deal-by-deal), the first dollars of that carry can flow as early as year 3 of the fund; under European (whole-fund), nothing flows to the GP until invested capital plus the 8 percent preferred return is back with LPs, which typically pushes the timing into years 6 to 10. Discounted to present value, the timing gap is worth tens of millions per senior partner on a fund this size. Partners moving between firms negotiate this distinction explicitly; junior professionals typically inherit whichever structure was negotiated for the fund and only realize the implication when their carry actually starts paying out.

Carry is also the most contested compensation structure in US finance from a tax perspective. The 2025 One Big Beautiful Bill Act, signed by President Trump on July 4, 2025, preserved the long-term capital gains treatment of carry despite serious reform attempts from both the Trump administration and Democratic lawmakers via the Carried Interest Fairness Act. The current regime taxes qualifying carry at 23.8 percent (20 percent top long-term capital gains rate plus the 3.8 percent net investment income tax), well below the 40.8 percent top rate on ordinary income, subject to the three-year holding period the 2017 TCJA introduced. The political fight is unresolved and will resurface in the 2026-2028 tax debates.

For the GP economics that continuation vehicles reset and roll forward (the mechanism reshaping PE compensation since 2022), see the continuation vehicles post. For the asset-side mark-downs producing visible accrual reversals in public PE firms' performance allocations, see the SaaS valuation reset post. The rest of this post covers how carry mechanically works across asset classes, with worked waterfall math, the cross-asset cuts (hedge fund, VC, credit, infrastructure), and the interview version of every question.

Carried interest, often called just "carry," is the share of fund profits a general partner receives above an agreed return on capital to the limited partners. It is the alignment incentive that makes a private fund a partnership rather than a fee-for-service arrangement. The GP charges a management fee to cover operating costs (salaries, rent, deal expenses) and earns its actual wealth from the carry pool on successful funds. Without carry, there is no economic mechanism that links the GP's compensation to the fund's investment performance.

Carried Interest

The general partner's share of a private fund's profits above a defined hurdle rate, paid as a partnership profits interest. In a standard PE buyout fund, carry is 20 percent of profits above an 8 percent preferred return to LPs, with a catch-up provision that brings the GP's share to roughly 20 percent of total profits once the hurdle is cleared. Carry is the GP's primary economic incentive on a fund and is the single largest line item in senior PE professionals' lifetime compensation.

The "2 and 20" shorthand is the historical convention adopted from hedge funds and applied to PE: a 2 percent annual management fee plus a 20 percent carry on profits. In practice the structure has evolved meaningfully since the 1980s. Management fees on the largest buyout funds have compressed to 1.25 to 1.5 percent, sometimes step-down to lower rates after the investment period, and often with offsets for transaction fees, monitoring fees, and other portfolio-company revenue captured by the GP. The 20 percent carry has held more consistently as the headline rate, though hurdle, catch-up, and waterfall mechanics have hardened in LP favor over the same period.

Fund-Level Economics: How Carry Fits In

A typical buyout fund has three economic flows to the GP. Management fees during the investment period (typically the first five years of a ten-year fund) are charged on committed capital (the full amount LPs have pledged to the fund), then step down to charges on invested capital (only the amount actually deployed) during the harvest period. Management fees fund the GP's day-to-day operations.

Transaction, monitoring, and portfolio-company fees flow to the GP from the portfolio companies themselves. Modern LP agreements typically offset 80 to 100 percent of these fees against management fees, so they are increasingly a passthrough rather than a meaningful incremental income stream for the GP.

Carry is the share of the fund's investment profits above the hurdle. It is the GP's path to wealth on a successful fund.

The GP commit, typically 1 to 5 percent of fund size, is the GP's own capital invested in the fund alongside LPs. The commit is the alignment mechanism that ensures the GP loses money if the fund loses money, not just gives back carry. On the largest funds the dollar amounts of the GP commit run into the hundreds of millions.

The carry mechanics on a standard PE buyout fund have three moving parts: the hurdle rate, the catch-up provision, and the 80/20 split above the catch-up.

The Hurdle Rate

The hurdle is the threshold the fund must clear before any carry accrues to the GP.

Hurdle Rate

Also called the preferred return or "pref," the hurdle is the minimum compound annual return the fund must deliver to LPs before the GP starts earning carry. The standard buyout-fund hurdle is 8 percent, applied to invested capital (or to commitments, depending on the LPA). Above the hurdle, the catch-up provision and the 80/20 split determine how profits are divided. If the fund does not clear the hurdle, the GP earns no carry on that fund, regardless of partial successes on individual deals.

The 8 percent buyout hurdle has been the convention since the 1980s and has held remarkably stable through cycles of LP and GP pricing power. Variants exist in other asset classes (5 to 7 percent for private credit, 6 to 8 percent for infrastructure, 0 percent for some VC structures) but the 8 percent figure is what an interviewer will default to when they say "the hurdle." The hurdle is compound, not simple, so on a 7-year average hold per dollar invested, the preferred return amounts to roughly 60 to 70 percent of invested capital in absolute dollars before any GP carry begins.

The Catch-Up Provision

Once the hurdle clears, the catch-up provision determines how fast the GP reaches its 20 percent target share of profits.

Catch-Up Provision

A mechanism that "catches the GP up" to its target share of profits once the hurdle has been cleared. In a full catch-up (the most common modern structure), all profits above the hurdle flow entirely to the GP until the GP has received roughly 20 percent of total profits (hurdle plus catch-up combined). After that, the 80/20 split applies on incremental profits. A 50/50 catch-up splits post-hurdle profits 50/50 between GP and LP until the GP reaches its 20 percent target share. A no catch-up structure simply applies the 80/20 split immediately above the hurdle, which is the most LP-favorable variant.

The combination of these three mechanics produces the distribution waterfall. The waterfall is the contractual sequence in which a fund's distributable cash is allocated between LPs and the GP. It is the most-tested specific mechanic in PE technical interviews, and the answer depends on whether the fund is structured as a European or American waterfall.

The European-versus-American distinction is the single most important PE waterfall concept and the most common interview question on this topic.

European Waterfall

A whole-fund waterfall where the entire fund's invested capital must be returned to LPs, plus the preferred return on all invested capital, before the GP earns any carry. Carry is calculated and paid only on aggregate fund-level profits across all deals. The European waterfall is more LP-friendly because the GP does not earn carry on early winners while later deals are still pending. It is the default structure in most European and many non-US fund jurisdictions, and it is increasingly common in US funds as well after a wave of LP push for tighter terms post-2022.

American Waterfall

A deal-by-deal waterfall where the GP earns carry on each individual deal as it is realized, subject to that deal's own hurdle being cleared. The American waterfall is more GP-friendly because cash carry distributions can begin as soon as the first deal is exited successfully, often years before the fund as a whole returns all invested capital. Clawback provisions are required to protect LPs against the GP earning carry on early winners that ultimately offset by later losses; the clawback obligates the GP to return previously distributed carry if the fund as a whole does not clear its hurdle.

Timing of GP Carry Under Each Structure

The mechanical difference is enormous in terms of when the GP gets paid. In a European waterfall, the GP's carry is back-loaded to the back half of the fund's life because the entire fund's invested capital plus preferred return must be returned first. In an American waterfall, the GP's first carry distributions can begin in years 3 to 5 of the fund, as soon as the first portfolio realizations clear the hurdle on a deal-by-deal basis.

The Clawback Protection

The clawback is the critical protection in an American waterfall. Without it, a GP could earn carry on early winning deals and the LPs would have no recourse if the later deals destroyed value. Modern American-waterfall LPAs include cumulative clawback provisions, often with an escrow mechanism that holds back a portion of each carry distribution as cash collateral against the clawback obligation. The clawback math is computed at the end of the fund's life: if cumulative carry distributed exceeds 20 percent of cumulative fund profits net of hurdle, the GP must return the excess to LPs.

Why the Market Has Moved European

The market has moved meaningfully toward European waterfalls in the post-2022 LP environment, with several large 2024-2025 US buyout funds adopting whole-fund structures that would have been unusual a decade earlier. The shift reflects the same LP push for tighter terms that has produced ILPA's continuation-fund guidance and the broader fee compression in private markets.

The cleanest way to internalize the European vs American distinction is to work through identical numbers under both. Consider a $1 billion fund that invests all $1 billion and returns $2.5 billion to LPs and GP combined over a 10-year hold (a 2.5x gross MOIC at the fund level; net MOIC to LPs after carry works out to 2.2x as shown below). Assume an 8 percent preferred return and a full catch-up (the most common modern PE structure).

The European-waterfall math is the textbook version because all flows happen at the fund level after all invested capital is returned. In practice the timing is back-loaded: most of the GP's carry crystallizes in years 6 to 10 of the fund, after the bulk of portfolio realizations.

The Same Fund Under an American Waterfall

Under an American waterfall on the same fund, the headline carry total would be similar at the end of the fund's life, but the timing of distributions changes materially. The GP could begin earning carry on the first deal exit in year 3 if that deal returned its invested capital plus hurdle on its own. By the time of the fifth or sixth exit, the GP might have received substantial carry distributions while the fund as a whole had not yet returned all invested capital. The clawback obligation at the end of the fund would adjust for any excess carry distributed.

Why Present Value Differs Materially Even at the Same Nominal Carry

The dollar difference in present value of GP carry between European and American waterfalls on the same fund can be meaningful. Carry received in year 4 is worth materially more in present-value terms than the same dollar amount received in year 9. A senior partner at a firm with American-waterfall funds is wealthier on a present-value basis than the same partner at a European-waterfall firm with the same nominal carry, even before considering reinvestment of early distributions.

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Carry does not vest immediately. A new partner or senior professional who is allocated a carry percentage receives the carry over a multi-year vesting schedule, typically with a cliff and a continued-service requirement.

Vesting Schedules

The standard vesting structure on a fund's carry allocation is 5 to 7 years of straight-line vesting with a 1 to 2 year cliff (no vesting until the cliff is reached, then linear vesting from the cliff date through year 5 to 7). Many firms structure carry vesting to align with the fund's expected investment-and-harvest cycle, so that a partner who fully vests is one who has worked on the fund through its substantive investment and realization phases.

Good Leaver vs Bad Leaver

Good leaver / bad leaver provisions govern what happens to unvested carry when a partner leaves the firm. A good leaver (retirement, disability, death, sometimes mutual separation) typically retains vested carry and may receive accelerated vesting on a portion of unvested carry, depending on the firm's policy. A bad leaver (resignation to a competitor, termination for cause) typically forfeits all unvested carry and in some cases is subject to clawback on previously distributed carry. The specific definitions are negotiated at the partner-agreement level and vary materially across firms.

The Move-Between-Firms Implication

For senior partners considering a move between firms, the unvested carry left behind at the prior firm is often the single largest economic consideration in the decision. A senior partner with $30 million of unvested carry at a current firm needs a meaningfully larger compensation package at the new firm to make the move economically rational, even before considering the reset on vesting at the new firm.

The carry pool on a fund is allocated to senior professionals at the firm in percentages that scale roughly with title and tenure.

Allocation by Title

Typical allocations on a buyout fund:

Dollar Outcomes by Fund Size

The dollar amounts these percentages translate to depend on the fund size and performance. A 1 percent carry allocation on a $5 billion fund that returns 2x net is roughly $10 million in carry over the fund's life (1 percent of the $1 billion of GP carry on $5 billion of profits). A 3 percent allocation on a $25 billion megafund at the same return is $150 million. Senior partners at the major buyout firms can earn hundreds of millions of carry across multiple successful funds; this is what makes PE one of the highest-paid professions in finance.

The GP Commit Carve-Out

The carry pool is separate from the GP commit obligation. Senior partners are typically expected to contribute personally to the GP commit, which compresses the immediate cash compensation relative to the eventual carry payout. The combination produces a steeply backloaded compensation profile that rewards continued service at a single firm across multiple fund cycles.

Carry is a long-duration compensation form, and the timing is driven by the fund's realization profile rather than its calendar life.

The J-Curve and DPI Dynamics

On a typical 10-year fund, the J-curve dynamics of PE returns mean that most carry payouts happen in years 5 through 10, after the fund has built up DPI (distributions to paid-in capital) above 1.0x. In a European waterfall, no carry pays out until DPI exceeds the fund's invested capital plus preferred return; in an American waterfall, carry can begin earlier but is subject to clawback if later deals underperform.

Continuation Vehicle Roll-Forwards

The continuation vehicle market has changed the payout timing for some GPs. When a CV is structured on a portfolio asset (see our continuation vehicles post), the GP typically rolls a meaningful portion (50 to 100 percent) of its crystallized carry from the original fund into the new CV as an alignment mechanism. The crystallized carry is therefore deferred rather than received as immediate cash, with the trade-off that the GP retains economic exposure to the asset going forward at the deal price.

The Post-2022 Realization Drag

The post-2022 PE liquidity environment has pushed back the realization timing on most 2018-2022 vintage funds, which means carry distributions have been later and smaller than the original fund-life models projected. This is one of the demand-side drivers behind the explosion in continuation vehicles and NAV loans covered in the continuation vehicles post.

The four largest publicly traded buyout managers (Blackstone, KKR, Apollo Global Management, Carlyle Group) all disclose carry economics in their 10-K filings at the segment level.

Reading the 10-K Line Items

The relevant line items are accrued performance allocations (the carry the firm expects to receive based on current portfolio marks but has not yet realized) and realized performance allocations (the carry that has been crystallized and distributed in the period). Blackstone, as the largest of the four with roughly $1.2 trillion in AUM, discloses the most detailed breakdown by segment (Real Estate, Private Equity, Credit and Insurance, Multi-Asset Investing, and Hedge Fund Solutions). The Blackstone 2025 10-K is the cleanest single reference for understanding how a large multi-strategy firm's carry economics work in aggregate. The accrued performance allocations are a balance-sheet line that fluctuates with portfolio marks; the realized number flows through the income statement when carry is actually distributed.

Why Firm-Level Numbers Differ From Partner Payouts

Two cautions when reading public-firm carry disclosures. First, the aggregate firm-level number is not the same as individual partner payouts: the firm-level carry pool is allocated across hundreds of senior professionals in carry-pool percentages. A firm-level $1 billion realized performance allocation in a single year reflects the firm's gross take on the fund, not the take-home of any individual partner. Second, accrued carry can reverse: a fund that marks down assets later in its life can produce a negative accrual that reverses previously recognized accrued carry. The Q1 2026 SaaS-driven mark-downs (covered in the SaaS valuation reset post) produced visible accrual reversals in several public PE firms' Q1 results.

The 2-and-20 PE convention is the reference, but carry varies materially across the alternative-asset universe.

Hedge Funds

Hedge funds typically charge a 20 percent performance allocation on net new gains, subject to a high water mark: the fund must exceed its previous peak NAV before performance allocation accrues again. The performance is annually crystallized in most fund structures, so the manager earns and is taxed on performance each calendar year rather than only at fund liquidation.

The tax treatment is meaningfully different from PE carry. Hedge-fund performance is often structured as a performance allocation (a partnership profits interest that flows through as the underlying character of gains, so short-term-trading gains pass through as ordinary income to the manager) rather than as an incentive fee (which is ordinary income to the manager regardless of underlying character). The distinction matters: a hedge fund manager running a long-term-holding strategy may capture LTCG treatment on portion of carry, while a high-frequency strategy generates predominantly ordinary income.

Equalization accounting is the mechanism hedge funds use to handle investors who subscribe at different points in the year relative to high-water-mark calculations. It is operationally complex and is a frequent topic in hedge-fund operations interviews. See our investment banking to hedge fund post for broader context on the HF compensation structure.

Venture Capital

VC funds typically charge 20 to 30 percent carry, often on the higher end for top-tier firms. Fund lives are longer (10 to 12 years, sometimes with multi-year extensions), and the waterfall is almost always European: VC fund LPs typically require return of all invested capital plus a hurdle before carry distributions begin, because the long-tail nature of VC returns means early winners can be more than offset by later write-offs.

VC carry is more variable than PE carry because returns are more dispersed: top-quartile VC funds can return 3 to 4x net MOIC, while bottom-quartile funds may return below 1x. The carry pool on a successful early-stage fund concentrated in one or two breakout investments can be enormous; on an unsuccessful fund it can be zero.

Growth Equity

Growth equity sits between PE and VC structurally. Carry is typically 20 percent with an 8 percent hurdle, often in a European waterfall, on fund lives of 10 to 12 years. The combination of larger check sizes than VC and lower loss rates than early-stage venture produces a tighter return distribution than VC and a more PE-like carry profile, with somewhat better timing than late-stage VC.

Our growth equity vs PE vs VC post covers the broader structural comparison.

Private Credit and Direct Lending

Private credit funds charge lower carry, typically 10 to 15 percent, given the lower expected return profile relative to equity buyout strategies. Hurdle rates are often set lower (5 to 7 percent) to reflect the lower risk profile of debt instruments. Some private-credit funds use a first-loss capital structure where the GP commit is meaningfully larger as a percentage of fund size, which compensates LPs for the lower carry rate.

Carry on private credit can crystallize on a more regular basis than PE because debt investments generate interest payments throughout the hold period. Some direct-lending funds use annual or quarterly crystallization mechanics that resemble hedge funds more than traditional PE. Our private credit explainer covers the broader asset class.

Infrastructure

Infrastructure funds have very long hold periods (typically 10 to 15 years for core funds, longer for super-core), and carry structures are adjusted accordingly. Carry rates are often 15 to 20 percent, with hurdle rates set at 6 to 8 percent depending on strategy. The long duration means waterfalls are essentially always European, with carry concentrated in the back half of the fund's life as long-duration infrastructure assets are exited or refinanced.

Real Estate

Real estate funds split into core (lower risk, lower return, carry as low as 10 to 15 percent with 6 to 7 percent hurdle), value-add (10-20 percent carry, 8 percent hurdle), and opportunistic (full 20 percent carry, 8 percent hurdle, structurally similar to PE buyout). Property-level cash flows from operating assets often allow for earlier carry crystallization than in pure buyout funds.

Secondaries and Continuation Vehicles

Secondary funds (the LPs in continuation vehicles and the buyers of LP-led secondary stakes) charge carry in the 10 to 20 percent range with hurdles modified to reflect the shorter expected duration and the discounted purchase price of secondary stakes. CV carry economics are reset on the new vehicle: as covered in the continuation vehicles post, the GP rolling carry into a CV resets the hurdle and the waterfall on the new vehicle, with the GP commit and roll-forward as the alignment mechanism.

The full cross-asset comparison in one place.

Get the complete guide: Download our comprehensive 160-page PDF covering valuation, M&A, LBO mechanics, and the compensation structures across PE, hedge funds, credit, and other alternative-asset roles, access the IB Interview Guide.

The carry tax fight is one of the most durable political controversies in US finance. The current US treatment is straightforward: carried interest is structured as a partnership profits interest under IRS rules (Rev. Proc. 93-27 is the foundational authority), so the tax character of the underlying gains flows through to the GP's distributive share. For a PE buyout fund holding portfolio companies for 3+ years (the threshold introduced by the 2017 TCJA), realized gains are long-term capital gains, taxed at the GP's individual rate of up to 20 percent, plus the 3.8 percent net investment income tax, for a 23.8 percent top federal rate.

The comparison point is ordinary income, which is taxed at the top federal rate of 37 percent plus the 3.8 percent NIIT for a 40.8 percent top federal rate. The differential is roughly 17 percentage points, and on a senior partner's carry pool that runs into hundreds of millions of dollars across a career, the dollar amounts at stake are substantial.

The 2017 Holding Period Change

The Tax Cuts and Jobs Act of 2017 introduced the requirement that an asset must be held for at least three years (extended from one year) for the partner's distributive share of capital gain to be eligible for long-term capital gains treatment. PE buyout funds with typical 4 to 7 year holds easily clear the threshold. The change had a more material impact on shorter-duration strategies (some hedge fund strategies, real estate flippers, secondary buyouts with quick exits).

2025 Reform Attempts and the OBBBA Outcome

The 2025 tax debate produced two serious reform attempts. First, President Trump publicly pushed in early 2025 for elimination of the LTCG treatment on carried interest, recasting it as ordinary income. Second, Democratic lawmakers reintroduced the Carried Interest Fairness Act, which would tax a sponsor's share of realized capital gains in respect of carried interest at ordinary income tax rates.

Neither proposal made it into the final legislation. The One Big Beautiful Bill Act, signed by President Trump on July 4, 2025, preserved the existing LTCG treatment of carried interest subject to the 3-year holding period. Cooley's tax analysis of the OBBBA's fund-manager provisions is the cleanest summary; Fortune's coverage of the bill's preservation of the carry loophole covers the political dynamics that produced the outcome.

The political fight is not over. The Carried Interest Fairness Act has been reintroduced in nearly every Congress since 2007, and the 2026-2028 tax debates will surface it again. The PE industry's response is a combination of trade-association lobbying (the American Investment Council leads the formal advocacy) and the substantive argument that partnership profits interests are economically distinct from wages and should retain their distinct tax treatment. Whether the argument continues to win politically in 2027-2028 is genuinely uncertain.

International Treatment

Carried interest tax treatment varies materially internationally. The UK taxes carry at a 28 percent CGT rate (with the Income-Based Carried Interest Rules potentially reclassifying carry on shorter-duration strategies as income). France has tightened carry treatment over the past decade and now generally treats carry on funds without a meaningful track record as ordinary income. Germany treats carry as 60 percent capital gain, 40 percent ordinary income at the partial-income method rate. The Cayman Islands and Luxembourg are the dominant fund-structuring jurisdictions and provide no source-level tax on carry distributions.

For US-based GPs at international funds, the tax planning involves managing carry through structures that respect both US partner-level and source-jurisdiction rules. The compliance complexity has grown materially over the past five years as multiple jurisdictions have tightened rules.

Three sample exchanges that cover the carry topics interviewers most commonly probe in PE, secondaries, and hedge-fund interviews.

"How does the GP make money on a fund?"

Three sources. Management fees of typically 1.25 to 2 percent annually on committed capital during the investment period, stepping down to invested capital during the harvest period. Transaction and monitoring fees from portfolio companies, mostly offset against management fees in modern LPAs. Carried interest, the GP's share of fund profits above a hurdle, typically 20 percent in a buyout fund with an 8 percent preferred return and a full catch-up. Management fees cover firm operations; carry is the GP's path to wealth on a successful fund. The GP also commits typically 1 to 5 percent of fund size as its own capital alongside LPs, which is the alignment mechanism.

"Walk me through European vs American waterfall."

European waterfall is whole-fund: the entire fund's invested capital plus preferred return must be returned to LPs before any GP carry is paid. Carry is calculated and paid on aggregate fund-level profits. It is more LP-friendly and back-loads the GP's carry to the back half of the fund life.

American waterfall is deal-by-deal: the GP earns carry on each individual deal as it is realized, subject to that deal's own hurdle being cleared. Cash carry can flow to the GP as early as year 3 of the fund. It is more GP-friendly because of the timing benefit, but it requires a clawback provision that obligates the GP to return previously distributed carry if the fund as a whole does not clear its hurdle. On the same fund the nominal carry totals are similar, but the present-value differs because of timing.

US funds historically used American; the market has moved toward European post-2022 as LP terms have tightened, but both structures are still common.

"What happens to unvested carry if a partner leaves the firm before the fund liquidates?"

It depends on the partner agreement and the leaving classification. A good leaver (retirement, disability, death, mutual separation) typically retains vested carry and may receive accelerated vesting on a portion of unvested carry. A bad leaver (resignation to a competitor, termination for cause) typically forfeits all unvested carry and in some cases is subject to clawback on previously distributed carry. Specific definitions are negotiated at the partner-agreement level and vary across firms.

The unvested carry left behind at a current firm is often the single largest economic consideration for a senior partner contemplating a move. A senior partner with $30 million of unvested carry needs a meaningfully larger comp package at the new firm to make the move economically rational, before considering vesting reset.

The recurring errors candidates make in interviews, ordered by frequency:

The rest:

Carried interest is the single most important compensation mechanic in private equity and the alternative-asset universe. The mechanics are mechanical and well-defined, but the dollar implications of small differences in waterfall structure, catch-up provision, and vesting can run into tens of millions for senior partners over a career. The cross-asset variation (hedge funds, venture, credit, infrastructure, real estate) is substantial and material to understand for any interview that crosses asset classes.

The 2025 tax debate confirmed that the long-term capital gains treatment of carry remains intact under the One Big Beautiful Bill Act, despite both Republican and Democratic reform attempts. The political fight is durable and will surface again. For 2026 candidates, the practical implication is that carry tax treatment remains a topic interviewers expect candidates to be conversant on, both as a substantive compensation question and as a political-context question that signals broader fluency in how the industry operates.

For deeper reading on adjacent topics: the PE fund structure post covers the GP/LP relationship in detail. The IRR vs MOIC vs cash-on-cash post covers the return metrics that determine when hurdles clear and carry accrues. The continuation vehicles post covers the carry-reset and roll-forward mechanics that have become central to PE economics in the post-2022 market. The SaaS valuation reset post covers the asset-side compression that has produced visible mark-downs in public PE firm accrued performance allocations. And the investment banking salary and bonus guide covers the broader compensation arc from analyst through senior partner across IB and PE.