Hedge fund carried interest in the USA refers to the share of profits that fund managers receive as part of their compensation, typically after meeting specific performance benchmarks. Unlike standard management fees, carried interest is performance-based and aligns the manager’s incentives with the fund’s success.

This form of compensation is usually structured as a percentage—commonly 20%—of the fund’s profits, and it does not require a significant capital contribution from the manager. Carried interest has been a subject of tax policy debate, as it is often taxed at the lower long-term capital gains rate rather than as ordinary income.

From a financial reporting and regulatory perspective, hedge fund carried interest must be properly valued and disclosed, especially for tax filings, investor reporting, or during fund transactions. The valuation of carried interest can be complex due to its contingent nature, depending on fund performance and distribution structures.

Understanding hedge fund carried interest is essential for fund managers, investors, and tax professionals. It plays a critical role in fund economics, tax planning, and overall compensation strategy, making it a key topic in the broader discussion of investment fund regulation and financial transparency in the United States. Visit for more info