Author: Gert-Tom Draisma / www.TristanFinance.com

First published: 24th of September 2026

Latest update: 2nd of October 2026

Status: First Draft

Parts I to IV established how a waterfall operates once the relevant economic population, cash flows, economic dates and contractual rules have been identified.

Part V introduces a fundamentally different problem.

The fund is not finished.

At an interim calculation date, the fund may contain:

• investments that have been realised;
• investments that remain unrealised;
• investments that have been partially realised;
• current NAV;
• remaining commitments;
• investments still to be made;
• future management fees and expenses;
• recycled or recallable capital;
• carry already distributed;
• carry calculated but withheld;
• tax distributions or tax advances;
• escrow balances; and
• economic outcomes that remain uncertain.

Yet carried interest may still need to be calculated.

The calculation may be required for:

• financial reporting;
• investor reporting;
• GP accounting;
• management information;
• carry-plan reporting;
• transaction analysis;
• valuation;
• audit;
• control;
• estimating potential carry exposure.

This creates several different concepts of carry.

Most importantly:

Realised Carry

Total Carry

Unrealised Carry

These terms must not be confused.

A useful conceptual relationship is:

Unrealised Carry = Total Carry − Realised Carry

This formula appears simple.

Its implementation is not.

Realised carry can generally be calculated from the relevant realised economic history.

Total carry requires the waterfall to be recalculated using a defined hypothetical treatment of the fund's unresolved economics.

That can require assumptions about:

• current NAV;
• unrealised investments;
• remaining commitments;
• future funding obligations;
• recycling;
• recallable distributions;
• subscription facilities;
• foreign currencies;
• tax advances;
• amounts held in escrow.

The purpose of Part V is therefore not to forecast how much carry the GP will ultimately earn.

It is to answer a more controlled question:

What does the waterfall produce at a specified calculation date under a specified interim valuation methodology?

That distinction is fundamental.

Unrealised Carry Calculation ≠ Forecast of Ultimate Carry

The final outcome remains uncertain.

An interim calculation should therefore be:

Defined + Objective + Reproducible + Reconciled

Where assumptions are necessary, they should be explicit.

The central architecture of Part V is:

Historical Realised Economics

↓

Realised Carry

and separately:

Historical Economics + Defined Treatment of Remaining Fund Economics

↓

Total Carry

then:

Total Carry − Realised Carry = Unrealised Carry

Section A — The Three Carry Measures

1. Realised Carry

Realised carry measures the carry generated by the relevant realised economic history under the governing waterfall.

Conceptually:

Realised Economic Events → Waterfall → Realised Carry

Depending on the fund architecture, those events may include:

• realised investment proceeds;
• realised losses;
• contributions;
• fees;
• expenses;
• write-offs;
• recycling;
• other amounts relevant to the realised waterfall.

Realised carry is therefore not necessarily:

20% × Realised Investment Profit

The full waterfall still applies.

2. Total Carry

Total carry asks a different question.

At the calculation date, suppose the remaining fund economics were incorporated into the waterfall according to the defined interim methodology.

What carry would the waterfall produce?

Conceptually:

Realised Economics + Defined Hypothetical Treatment of Remaining Economics → Waterfall → Total Carry

The word total is important.

Total carry includes the carry attributable to the complete economic position represented in that calculation.

It is not merely the carry on unrealised investments.

3. Unrealised Carry

Unrealised carry is then derived as the difference between total carry and realised carry:

Unrealised Carry = Total Carry − Realised Carry

This makes unrealised carry a residual.

Therefore:

Unrealised Carry Is a Residual, Not an Independent Waterfall

This distinction prevents one of the most common conceptual errors in interim carry calculations.

Section B — Why Unrealised Carry Should Not Usually Be Calculated Independently

4. The Tempting Calculation

Suppose:

• unrealised investment cost = €100m;
• NAV = €150m;
• unrealised gain = €50m;
• carry rate = 20%.

A tempting calculation is:

€50m × 20% = €10m Unrealised Carry

That may be wrong.

The €50 million unrealised gain does not exist independently from the fund's previous waterfall history.

The fund may still have:

• unreturned capital from realised investments;
• accumulated preferred return;
• realised losses;
• previous carry;
• catch-up balances;
• write-offs;
• other economic items.

The unrealised value must generally enter the same cumulative economic architecture.

5. A Simple Example

Assume:

Realised Investment A

Cost:

€100m

Proceeds:

€80m

Realised loss:

€20m

Unrealised Investment B

Cost:

€100m

NAV:

€150m

Unrealised gain:

€50m

Ignore preferred return and expenses.

At total-fund level:

Total cost:

€200m

Total value:

€230m

Total profit:

€30m

At 20% carry:

Total Carry = €6m

Realised carry:

€0m

Therefore:

Unrealised Carry = €6m

not:

€50m × 20% = €10m

The €20 million realised loss absorbs part of the unrealised gain before carry is generated.

6. Realised Profit Can Also Affect Unrealised Carry

Reverse the example.

Realised Investment A

Cost:

€100m

Proceeds:

€140m

Realised profit:

€40m

Unrealised Investment B

Cost:

€100m

NAV:

€110m

Unrealised gain:

€10m

Total profit:

€50m

Total carry:

€10m

Suppose realised carry is:

€8m

Then:

Unrealised Carry = €10m − €8m = €2m

In this simple case that happens to equal 20% of the €10 million unrealised gain.

But that equality arises from the particular waterfall state.

It is not a general rule.

Section C — Realised Carry

7. Realised Carry Is Cumulative

Realised carry should generally be considered cumulatively within the relevant waterfall population.

Suppose:

Investment A

Realised profit:

€40m

Investment B

Realised loss:

€15m

Net realised profit:

€25m

If the waterfall cross-collateralises A and B:

Realised Carry = €25m × 20% = €5m

not:

€40m × 20% = €8m

The realised carry calculation must respect the architecture developed in Part III.

8. Realised Carry Versus Carry Distributed

Suppose the realised waterfall generates:

€10m Carry

but the GP has received only:

€7m

because:

• €2m is held in escrow;
• €1m is otherwise withheld.

Then:

Realised Carry = €10m

Carry Distributed = €7m

These are different measures.

Therefore:

Carry Generated ≠ Carry Distributed

9. Carry Retained

Continue the example.

Realised carry:

€10m

Distributed:

€7m

Retained:

€3m

The retained amount may consist of:

• escrow;
• holdback;
• reserve;
• another contractual retention.

Thus:

Carry Generated = Carry Distributed + Carry Retained

in this simplified representation.

But retained carry is still not necessarily final carry.

10. Final Entitlement Remains Different

Even if:

€10m Carry Generated

and:

€7m Distributed

the final fund economics could later support only:

€6m

The GP may then face clawback or another reconciliation mechanism.

Therefore:

Carry Generated ≠ Carry Distributed ≠ Carry Retained ≠ Final Carry Entitlement

Part VI will calculate that final reconciliation.

Section D — Total Carry

11. Hypothetical Liquidation

A common conceptual approach to total carry is to ask:

What would the waterfall produce if the remaining fund value were incorporated as a hypothetical realisation at the calculation date?

Suppose:

• cumulative realised distributions = €120m;
• current NAV = €80m.

A simplified total-value calculation might introduce:

€80m Hypothetical Distribution

into the waterfall.

The waterfall is then recalculated on:

Actual Historical Events + Hypothetical NAV Realisation

This produces total carry.

12. NAV Is Not Automatically Cash

The €80 million NAV has not actually been distributed.

It is a valuation.

Therefore the hypothetical liquidation is a calculation device.

It does not mean:

• the assets have been sold;
• the NAV will be realised;
• the GP has earned the calculated amount irrevocably;
• the calculated carry is distributable.

Therefore:

Hypothetical Distribution ≠ Actual Distribution

and:

Total Carry ≠ Necessarily Distributable Carry

Section E — Basic Total-Carry Example

13. Fund Position

Assume:

• total contributions = €100m;
• realised distributions = €70m;
• NAV = €80m;
• no preferred return;
• 20% carry.

Total economic value:

€70m + €80m = €150m

Total profit:

€50m

Total carry:

€10m

14. Realised Carry

Using realised cash flows only:

Contributions:

€100m

Realised distributions:

€70m

The LP has not yet recovered its capital.

Therefore:

Realised Carry = €0m

15. Unrealised Carry

Total carry:

€10m

Realised carry:

€0m

Therefore:

Unrealised Carry = €10m

This is the simplest form of the residual calculation.

Section F — A More Developed Example

16. Realised History

Assume:

• contributions = €100m;
• realised distributions = €130m;
• NAV = €50m;
• no hurdle;
• 20% carry.

Realised profit:

€30m

Realised carry:

€6m

17. Total Carry

Total value:

€130m + €50m = €180m

Total profit:

€80m

Total carry:

€16m

18. Unrealised Carry

€16m − €6m = €10m

Again:

Unrealised Carry = €10m

But this result has been obtained by:

1. calculating realised carry;
2. calculating total carry;
3. taking the difference.

That method remains valid even when the waterfall becomes more complex.

Section G — Preferred Return and Total Carry

19. Hurdles Make the Residual Approach More Important

Assume:

• contributions = €100m;
• realised distributions = €120m;
• NAV = €30m;
• preferred-return requirement at the calculation date = €20m;
• 100% catch-up;
• 20% carry.

Realised economics:

Profit:

€20m

That amount is entirely absorbed by the preferred return.

Therefore:

Realised Carry = €0m

20. Total Economics

Total value:

€150m

Profit:

€50m

Waterfall:

Return capital:

€100m

Preferred return:

€20m

Catch-up:

€5m

Remaining:

€25m

Residual GP carry:

€5m

Total carry:

€10m

Therefore:

Unrealised Carry = €10m − €0m = €10m

21. Why 20% of Unrealised Gain Can Fail Dramatically

The NAV is:

€30m

If someone simply treated the €30 million NAV as unrealised profit and multiplied by 20%, the result would be:

€6m

But the correct residual unrealised carry in this example is:

€10m

Why?

Because the NAV moves the whole cumulative waterfall from the end of the preferred-return tier through:

• catch-up;
• residual split.

The marginal carry rate through part of that movement is 100%.

Therefore:

Change in NAV × Headline Carry Percentage ≠ Necessarily Change in Carry

Section H — Unrealised Carry Can Be Negative

22. A Counterintuitive Result

Suppose realised carry was generated earlier.

Later, unrealised investments deteriorate.

Assume:

Realised Carry = €10m

After including current NAV:

Total Carry = €7m

Then:

Unrealised Carry = €7m − €10m = (€3m)

The negative unrealised carry represents the reduction in total carry entitlement caused by the current unrealised position.

It does not mean that a separate negative carry waterfall exists.

23. Economic Interpretation

The negative €3 million indicates:

Based on the current total economic position, the fund supports €3 million less carry than has been generated by the realised waterfall.

Depending on the fund terms, this may signal:

• potential clawback exposure;
• a reduction in future carry distributions;
• use of escrow;
• a holdback;
• another protective mechanism.

Therefore:

Negative Unrealised Carry → Potential Interim Over-Distribution Indicator

It is not automatically a legal repayment obligation.

Section I — NAV

24. What NAV Represents

NAV provides a current valuation of the fund's remaining assets and liabilities under the applicable valuation framework.

For carry purposes, however, the relevant question is:

How should NAV enter the contractual waterfall calculation?

Potential methodologies can include:

• treating NAV as hypothetical proceeds;
• adjusting NAV for defined obligations;
• applying discounts or reserves;
• excluding certain assets or liabilities;
• using another contractual measure.

Therefore:

Accounting NAV ≠ Automatically Waterfall Liquidation Value

25. Gross NAV Versus Net Economic Position

Suppose:

NAV:

€100m

But the fund also has:

• future funding obligations;
• remaining commitments;
• expenses;
• other liabilities.

The economic position available to support carry may be less than €100 million.

This leads to one of the most important issues in interim carry calculation:

Remaining Commitment

Section J — Remaining Commitment

26. The Basic Problem

Suppose a fund has:

NAV = €100m

and:

Remaining Commitment = €30m

If the investor may still be required to contribute the €30 million, current NAV alone does not describe the complete economic position.

The investor has:

• an interest in €100 million of current fund value;
• a potential contractual obligation to contribute another €30 million.

Therefore:

Current NAV ≠ Net Liquidation Value if Future Contractual Funding Obligations Remain

27. A Conservative Adjustment

One possible methodology is:

Adjusted Hypothetical Value = NAV − Remaining Commitment

Thus:

€100m − €30m = €70m

The €70 million becomes the adjusted value used in the total-carry calculation.

This approach is deliberately conservative.

It assumes the remaining commitment is funded without attributing any additional value to what that funding may purchase or finance.

28. Why This Is Conservative

If the remaining €30 million is ultimately drawn to make successful investments, it may generate substantial value.

Deducting the entire amount from NAV assumes:

Future Funding = Economic Cost

without simultaneously assuming:

Future Funding → Future Asset Value

This biases the calculation downward.

That may be intentional.

The purpose is not necessarily to predict the most likely outcome.

It may instead be to establish a defensible current carry amount without introducing speculative assumptions about future investments.

Therefore:

Conservative Outcome ≠ Expected Outcome

Section K — Two Ways of Representing Remaining Commitment

29. Method 1 — Deduct Remaining Commitment from NAV

Assume:

NAV:

€100m

Remaining commitment:

€30m

Adjusted hypothetical value:

€70m

The total waterfall is run using:

€70m

as the relevant remaining value.

This is simple.

30. Method 2 — Introduce a Hypothetical Drawdown

Instead of reducing NAV, introduce:

€30m Hypothetical Contribution

into the waterfall.

The fund then contains:

• current NAV = €100m;
• additional hypothetical contribution = €30m.

The net economic value appears similar:

€100m − €30m = €70m

But the waterfall result need not be identical.

31. Why the Results Can Differ

A hypothetical contribution can affect:

• unreturned capital;
• preferred-return base;
• IRR;
• MOIC;
• hurdle state;
• catch-up;
• timing.

Simply reducing NAV changes value but does not necessarily reproduce those state changes.

Therefore:

Same Net Economic Value ≠ Necessarily Same Waterfall Result

This is a critical principle.

Section L — Remaining Commitment with No Hurdle

32. Simple Example

Assume:

• historical contributions = €100m;
• realised distributions = €120m;
• NAV = €80m;
• remaining commitment = €20m;
• 20% carry;
• no hurdle.

NAV Deduction

Adjusted NAV:

€80m − €20m = €60m

Total value:

€120m + €60m = €180m

Profit:

€80m

Total carry:

€16m

33. Hypothetical Drawdown

Instead add a €20 million contribution.

Total contributions:

€120m

Total value:

€120m realised distributions + €80m NAV = €200m

Profit:

€80m

Carry:

€16m

In this very simple waterfall:

Both Methods Produce €16m

The methods appear equivalent.

But this equivalence does not survive every waterfall.

Section M — Remaining Commitment with a Preferred Return

34. Timing Breaks the Equivalence

Assume the same fund has an 8% preferred return.

If €20 million is deducted directly from NAV, the adjustment does not itself create a dated contribution.

If instead €20 million is introduced as a hypothetical contribution, the model must assign it an economic date.

That contribution can then affect preferred return.

The result depends on:

• hypothetical contribution date;
• calculation date;
• accrual methodology;
• compounding methodology.

Thus:

NAV Deduction → Value Adjustment

while:

Hypothetical Drawdown → New Waterfall Event

Those are not mathematically identical operations.

35. Illustrative Example

Suppose:

• remaining commitment = €20m;
• hypothetical drawdown occurs one year before the calculation date;
• simple preferred return = 8%.

The hypothetical drawdown creates additional preferred return of:

€20m × 8% = €1.6m

A simple NAV deduction does not automatically create that €1.6 million hurdle balance.

The two methods can therefore produce different carry.

Section N — Which Remaining Commitment?

36. Commitment Is Not a Single Concept

Suppose:

Original commitment:

€100m

Contributed capital:

€70m

Remaining nominal commitment:

€30m

That does not automatically mean the economically relevant remaining funding obligation is exactly €30 million.

Questions can include:

• are previous distributions recallable?
• has capital been recycled?
• has the investment period ended?
• are commitments still available for investments?
• are they available only for fees and expenses?
• have portions expired or been released?
• are there contractual limitations on future drawdowns?

Therefore:

Nominal Remaining Commitment ≠ Necessarily Relevant Remaining Funding Obligation

Section O — Investment Period Versus Post-Investment Period

37. During the Investment Period

Suppose:

Remaining commitment:

€30m

and the fund remains inside its investment period.

The €30 million may still be drawn for:

• new investments;
• follow-on investments;
• fees;
• expenses.

If drawn for new investments, the contribution may acquire an offsetting asset.

Therefore deducting the entire €30 million without attributing future asset value is conservative.

38. After the Investment Period

Now suppose the investment period has ended.

Remaining commitment may be drawable only for limited purposes such as:

• management fees;
• expenses;
• follow-on investments;
• existing obligations.

The economic character of the remaining commitment has changed.

A large portion may now represent expected future costs rather than capital expected to acquire new investments.

Therefore:

Same Remaining Commitment Amount + Different Fund-Life Stage ≠ Same Economic Meaning

39. Numerical Illustration

Consider two funds.

Fund A — Investment Period

NAV:

€100m

Remaining commitment:

€30m

Most of the €30 million remains available for investments.

Fund B — Post-Investment Period

NAV:

€100m

Remaining commitment:

€30m

Most of the €30 million can now only be used for:

• fees;
• expenses;
• limited follow-ons.

The nominal numbers are identical.

But the expected economics differ.

A model attempting to forecast ultimate outcomes might treat them differently.

A deliberately conservative current-carry methodology may still deduct the full €30 million from both.

That is a methodological choice.

Section P — Conservative Methodologies

40. The Attraction of Simplicity

A conservative methodology can be designed around five characteristics:

Simple + Objective + Reproducible + Conservative + Defendable

For example:

Adjusted NAV = NAV − Relevant Remaining Commitment

has several advantages.

It requires relatively few assumptions.

It can be reproduced.

It does not require forecasting:

• future investments;
• future returns;
• future drawdown timing;
• future exit values.

Its weakness is also clear:

It can understate the economic value likely to emerge from remaining investment capacity.

That is precisely why it is conservative.

41. Conservative Does Not Mean Economically Expected

Suppose:

• remaining commitment = €30m;
• management expects €25m to fund investments;
• those investments are expected to generate value.

A forecast model might attempt to estimate that value.

A conservative carry model may deliberately refuse to do so.

The two models answer different questions.

Therefore:

Unrealised Carry Calculation ≠ Business Plan

and:

Unrealised Carry Calculation ≠ Forecast of Ultimate Carry

42. The Slippery Slope of Assumptions

Once a model attempts to estimate the future use of remaining commitment, it may need assumptions about:

• how much will be drawn;
• when it will be drawn;
• which investments will receive it;
• future management fees;
• future expenses;
• future investment returns;
• future exit timing;
• future FX rates.

Each assumption creates another source of model risk.

Therefore:

More Assumptions → More Model Dependency → Less Objectivity

A more detailed model is not automatically a more reliable carry calculation.

43. Detail Is Not the Same as Accuracy

A model could assume:

• €18.7m future investment funding;
• €6.3m follow-on funding;
• €3.1m management fees;
• €1.9m expenses;

and then forecast returns for each amount.

This looks sophisticated.

But every number may be uncertain.

A simple full deduction of €30 million may be less economically predictive but more objectively reproducible.

Therefore:

More Detailed Assumption ≠ More Reliable Answer

Section Q — Practitioner Methodology

44. A Conservative Approach Used in Practice

In unrealised carried-interest calculations I worked with at AlpInvest, we used a deliberately conservative approach.

Remaining unfunded commitment was generally represented in one of two ways:

• deducted from NAV; or
• introduced as an additional drawdown cash flow.

The objective was not to predict precisely how the remaining commitment would ultimately be used.

The objective was to ensure that the carry calculation did not ignore a real future funding obligation.

This produced an approach that was:

Simple + Objective + Reproducible + Conservative + Defendable

The important qualification is that the two representations are not automatically equivalent in every waterfall.

Where timing-sensitive hurdles exist, introducing a hypothetical drawdown can affect the waterfall differently from deducting the same amount from NAV.

Section R — Remaining Commitment Worked Example

45. Fund Position

Assume:

Historical contributions:

€100m

Historical distributions:

€140m

NAV:

€90m

Remaining commitment:

€30m

Relevant preferred-return requirement before considering the remaining commitment:

€20m

Carry:

20%

Full catch-up.

46. Ignore Remaining Commitment

Total value:

€140m + €90m = €230m

Profit:

€130m

Waterfall:

Preferred return:

€20m

Catch-up:

€5m

Residual profit:

€105m

Residual carry:

€21m

Total carry:

€26m

Check:

€26m / €130m = 20%

47. Deduct Remaining Commitment from NAV

Adjusted NAV:

€90m − €30m = €60m

Total value:

€140m + €60m = €200m

Profit:

€100m

Waterfall:

Preferred return:

€20m

Catch-up:

€5m

Residual:

€75m

Residual carry:

€15m

Total carry:

€20m

Difference caused by the conservative remaining-commitment adjustment:

€26m − €20m = €6m

48. Economic Interpretation

The €30 million remaining commitment reduced total carry by:

€6m

In this example the fund is already beyond catch-up, so the marginal carry rate is 20%.

Therefore:

€30m × 20% = €6m

But this relationship should not be generalised.

If the adjustment moves the fund across:

• hurdle;
• catch-up;
• super-carry threshold,

the carry impact may be very different.

Section S — Remaining Commitment Across a Catch-Up Boundary

49. Fund Before Adjustment

Assume:

• capital = €100m;
• preferred-return requirement = €20m;
• full catch-up;
• 20% carry;
• total hypothetical value before remaining-commitment adjustment = €130m.

Profit:

€30m

Waterfall:

Preferred return:

€20m

Catch-up:

€5m

Residual:

€5m

Residual carry:

€1m

Total carry:

€6m

50. Deduct €10m Remaining Commitment

Adjusted total value:

€120m

Profit:

€20m

The fund now finishes exactly at the preferred-return threshold.

Carry:

€0m

A €10 million reduction in value reduced carry from:

€6m → €0m

The carry change is:

€6m

not:

€10m × 20% = €2m

because the adjustment moved the waterfall backwards through:

• residual tier;
• catch-up tier.

Again:

Change in Value × Headline Carry Percentage ≠ Necessarily Change in Carry

Section T — Unrealised Carry by Investment

51. Allocation Is a Separate Question

Suppose total unrealised carry is:

€10m

and the fund has three unrealised investments.

It may be useful for reporting to allocate the €10 million among those investments.

But the total carry should first be determined under the governing waterfall.

Allocating the result is a separate step.

Therefore:

Calculate Total Unrealised Carry → Then Allocate

is not necessarily equivalent to:

Calculate Carry Independently on Each Unrealised Investment → Sum

52. Why Investment-Level Carry Can Mislead

Suppose:

Total unrealised gain:

€40m

At 20%:

€8m

But if A were independently assigned:

€8m

and C:

€2m

while B received zero negative carry, the total would become:

€10m

That ignores B's loss.

Thus:

Sum of Positive Investment Carry ≠ Necessarily Total Unrealised Carry

Section U — Allocation of Unrealised Carry

53. Profit-Proportional Allocation

If total unrealised carry is €8 million and the governing reporting methodology allocates it according to net investment contribution to the carry result, an allocation methodology must deal with both:

• gains;
• losses.

It is not sufficient simply to allocate to profitable investments.

Loss-making investments may have reduced the total carry available.

54. Attribution Is Not Creation

An investment-level allocation of fund carry is an attribution of a fund-level result.

It does not mean the investment independently generated that carry under its own waterfall.

Therefore:

Carry Attribution ≠ Independent Carry Calculation

This distinction is important for reporting and analytics.

Section V — Partially Realised Investments

55. Realised and Unrealised Components Can Coexist

Suppose an investment cost:

€40m

The fund sells half its position for:

€30m

and retains the remainder at NAV:

€25m

Total value:

€55m

Total gain:

€15m

But the investment now contains:

• realised proceeds;
• remaining unrealised value.

The waterfall must classify these components correctly.

56. Realised Carry Need Not Equal Carry on Realised Gain

It may be tempting to assign half the cost:

€20m

to the sold position and conclude:

Realised gain:

€10m

Carry:

€2m

But the governing waterfall may operate cumulatively across the fund.

The partial realisation is one event in the broader waterfall state.

Therefore:

Investment-Level Realised Gain ≠ Necessarily Realised Fund Carry Base

Section W — Write-Offs and Write-Downs in Interim Carry

57. Write-Offs

Suppose:

• realised profit elsewhere = €50m;
• one remaining investment with €20m cost is written off.

If the waterfall recognises the write-off:

Net relevant performance:

€30m

At 20%:

€6m Carry

Ignoring the write-off would produce:

€10m

The write-off therefore affects current total carry even though it produces no distribution.

58. Write-Downs

Suppose an investment:

• cost = €30m;
• NAV falls to €10m.

Unrealised loss:

€20m

If NAV participates in the total-carry calculation, that write-down can reduce total carry immediately.

Thus:

No Realisation ≠ No Carry Effect

59. Recovery

If the investment later recovers:

€10m NAV → €25m NAV

total carry may increase again.

The carry calculation therefore evolves with the economic state.

This creates a time series:

Calculation Date 1 → Total Carry 1

Calculation Date 2 → Total Carry 2

Calculation Date 3 → Total Carry 3

The movement itself becomes useful information.

Section X — Carry Roll-Forward

60. Carry Through Time

Suppose:

Carry does not necessarily increase monotonically.

Year 4 demonstrates that total carry can fall.

This can result from:

• write-downs;
• losses;
• expenses;
• additional contributions;
• changes in hurdle balances;
• remaining-commitment changes;
• FX;
• other economic events.

Therefore:

Carry Is a State-Dependent Measure, Not a One-Way Accumulation

61. Carry Movement

A simple roll-forward is:

Opening Total Carry

Change in Total Carry

=

Closing Total Carry

But the change should be explainable by economic drivers.

For example:

NAV Movement

Realised Events

New Contributions

Expenses

Hurdle Accrual

Other Waterfall Events

↓

Change in Total Carry

This becomes an important control.

Section Y — Realised Carry Roll-Forward

62. Incremental Realised Carry

Suppose cumulative realised carry is:

Year 1:

€3m

Year 2:

€5m

Incremental realised carry in Year 2:

€5m − €3m = €2m

Therefore:

Incremental Realised Carry = Current Cumulative Realised Carry − Previous Cumulative Realised Carry

The same principle introduced in Part I continues to apply.

63. Realised Carry Can Also Decrease

Suppose:

Previous cumulative realised carry:

€10m

A later realised loss enters the waterfall.

Recalculated cumulative realised carry:

€8m

Incremental realised carry:

€8m − €10m = (€2m)

This negative movement does not necessarily mean €2 million is immediately repaid.

It means the cumulative realised entitlement has fallen.

The contractual consequences are a separate question.

Section Z — Carry Available for Distribution

64. Calculated Carry Is Not Automatically Payable

Suppose:

Total carry:

€20m

Realised carry:

€12m

Unrealised carry:

€8m

Even the €12 million realised carry may not all be distributable.

The governing terms may impose:

• escrow;
• holdbacks;
• NAV tests;
• reserves;
• other restrictions.

Therefore:

Realised Carry ≠ Necessarily Carry Available for Distribution

65. A Carry Availability Bridge

Conceptually:

Realised Carry

−

Required Escrow

−

Required Holdbacks

−

Other Restrictions

=

Carry Available for Distribution

This bridge separates economic generation from cash availability.

Section AA — Escrow

66. Why Escrow Exists

Carry may be placed in escrow to provide protection against later economic deterioration.

Suppose:

Realised carry:

€10m

Escrow requirement:

30%

Escrow:

€3m

Immediately distributable:

€7m

Thus:

Carry Generated = €10m

Carry Distributed = €7m

Carry Held in Escrow = €3m

67. Escrow Does Not Change Carry Generation

If the waterfall generated €10 million, placing €3 million in escrow does not reduce generated carry to €7 million.

It changes the disposition of the carry.

Therefore:

Waterfall Calculation → Carry Generated

then:

Distribution Rules → Carry Paid / Retained

These should remain separate layers.

Section AB — Holdbacks

68. Holdback Versus Escrow

A holdback can economically resemble escrow but may operate differently.

The important modelling distinction is that an amount can be:

• economically generated;
• not yet distributed;
• subject to future release conditions.

Therefore the system should not infer carry solely from cash paid to the GP.

Section AC — Tax Distributions and Tax Advances

69. Tax Can Create Cash Before Final Carry Cash

In some fund structures, taxable income may be allocated to the GP or carry vehicle before corresponding carry cash has been distributed.

The governing arrangements may therefore permit tax distributions or tax advances.

For carry analysis, the critical question is:

Is the payment additional economic carry, or is it cash advanced against an existing or future carry entitlement?

These are not the same.

70. Simple Tax-Advance Example

Suppose:

Calculated carry entitlement:

€10m

Tax advance already paid:

€2m

Later cash otherwise available for carry:

€10m

If the €2 million is treated as an advance against carry, the remaining cash payable may be:

€8m

The GP has received:

€2m + €8m = €10m

not:

€12m

Therefore:

Cash Paid to GP ≠ Necessarily Additional Carry Earned

71. Economic Entitlement Versus Cash Timing

The distinction is:

Economic Carry Entitlement

versus:

Timing of Cash Paid Against That Entitlement

Tax distributions can alter the second without necessarily altering the first.

Therefore:

Economic Carry Entitlement ≠ Timing of Carry Cash

Section AD — Tax Advances and Interim Carry

72. Interim Overpayment Risk

Suppose:

• tax advances = €3m;
• other carry distributions = €7m;
• total cash received by GP = €10m.

Later the total waterfall supports only:

€8m

Potential economic excess:

€2m

Whether and how the €3 million tax advance enters any clawback calculation depends on the governing provisions.

Therefore tax-distribution mechanics cannot always be analysed independently from clawback.

Part VI will address this directly.

Section AE — Subscription Facilities

73. Interim Carry and Financing Timing

Part II established that subscription facilities can create a difference between:

Investment Date

and:

Investor Capital-Call Date

Part V adds another question.

At an interim calculation date, there may be:

• investments already owned by the fund;
• facility debt still outstanding;
• LP capital not yet called.

If the calculation uses NAV without recognising the financing obligation appropriately, the fund's net economic position can be overstated.

74. Simple Example

Assume:

Assets:

€100m

Subscription facility liability:

€20m

If €100 million represents gross asset value before the debt:

Net value:

€80m

Using €100 million as hypothetical liquidation proceeds without accounting for the €20 million financing obligation would overstate value available to the waterfall.

Therefore:

Gross Asset Value ≠ Net Economic Value Available to the Waterfall

75. Do Not Double Count

If NAV already includes the facility liability, deducting it again would understate value.

Therefore the calculation must understand exactly what the reported NAV represents.

This illustrates another core principle:

Correct Adjustment Applied to the Wrong Base = Wrong Result

Before making any interim adjustment, establish whether the item is already reflected in NAV.

Section AF — Remaining Commitment and Subscription Facilities Together

76. Potential Double Counting

Suppose:

• remaining commitment = €30m;
• subscription facility outstanding = €20m.

If €20 million of the remaining commitment is expected to repay the facility, blindly deducting both:

€30m + €20m = €50m

may double-count the same economic obligation.

The relationship between:

• uncalled commitment;
• facility debt;
• NAV;
• future capital calls

must therefore be understood.

77. Economic Bridge

A useful bridge may begin with:

Reported NAV

then identify separately:

• liabilities already included;
• liabilities not included;
• remaining investor funding obligations;
• overlap between those items.

Only then should the adjusted economic value be determined.

Therefore:

Adjustment Requires Understanding of the Base Before Adjustment

Section AG — Recycling and Interim Carry

78. Recallable Distributions Affect Future Funding Capacity

Suppose:

• nominal remaining commitment = €10m;
• recallable distributions = €15m.

Depending on the governing terms, future investor funding exposure may exceed the nominal €10 million.

If the interim carry methodology considers future funding obligations, recallable amounts may therefore matter.

79. Avoiding Double Counting Again

Suppose a recallable distribution has already been incorporated into the remaining-commitment figure reported by the administrator.

Adding it separately would double count.

The calculation specification should define:

Relevant Remaining Funding Obligation

rather than blindly adding database fields.

Section AH — Distribution in Kind in Interim Carry

80. Realised or Unrealised?

Suppose securities are distributed in kind to LPs at a value of:

€20m

For the fund waterfall, the distribution may be treated as a realised economic distribution even though no cash was received.

The remaining securities are no longer part of fund NAV.

Therefore:

Non-Cash Distribution Can Be a Realised Waterfall Event

The relevant value and economic date follow the governing terms.

81. Avoiding NAV Double Counting

If:

• €20m securities have been distributed in kind;
• current NAV excludes those securities;

the waterfall history should include the €20 million distribution.

If the calculation mistakenly leaves the securities in NAV and also records the distribution, total value is overstated.

Therefore:

Historical Distribution + Current NAV Must Represent Mutually Consistent Economic Populations

Section AI — FX and Interim Carry

82. Valuation Currency Matters

Suppose the fund waterfall operates in EUR but an unrealised investment is valued in USD.

The NAV must be translated according to the defined methodology.

Changes in EUR value can arise from:

• underlying asset performance;
• FX movements.

Both can affect total carry if the translated NAV enters the waterfall.

Detailed FX mechanics are addressed in Part VI.

The important principle here is:

Interim Carry Requires a Consistent Valuation Currency

Section AJ — Carry Before and After a Valuation Change

83. Example

Assume:

• realised carry = €5m;
• total carry before valuation update = €12m.

Unrealised carry:

€7m

NAV subsequently falls.

New total carry:

€9m

Realised carry remains:

€5m

New unrealised carry:

€4m

Movement:

€4m − €7m = (€3m)

The €3 million reduction is an unrealised carry movement caused by the updated total economic state.

Section AK — Carry Before and After a Realisation

84. Conversion from Unrealised to Realised

Suppose before an exit:

Realised carry:

€5m

Total carry:

€15m

Unrealised carry:

€10m

An investment is then sold exactly at its previous NAV.

If no other economics change, total carry may remain:

€15m

But realised carry may increase to:

€9m

Then:

Unrealised carry becomes:

€6m

Total carry has not changed.

The composition has.

Therefore:

Realisation Can Convert Unrealised Carry into Realised Carry Without Changing Total Carry

85. Carry Bridge

Before:

€5m Realised + €10m Unrealised = €15m Total

After:

€9m Realised + €6m Unrealised = €15m Total

This is an important reconciliation.

Section AL — Realisation Above NAV

86. Positive Realisation Variance

Suppose an investment has NAV:

€50m

but is sold for:

€60m

Additional value:

€10m

The realisation can:

1. convert previously unrealised carry into realised carry; and
2. create additional total carry because proceeds exceed prior NAV.

The two effects should be separated.

87. Realisation Below NAV

Likewise, if the investment sells for:

€40m

against previous NAV of €50 million:

Value decreases by:

€10m

Total carry may decline.

At the same time, part of the remaining carry becomes realised.

Thus:

Realisation Effect = Reclassification Effect + Valuation Difference Effect

This is a useful carry bridge.

Section AM — Interim Carry Through the Fund Life

88. Early Fund Life

During early fund life:

• contributions are high;
• distributions are limited;
• NAV is developing;
• remaining commitment is large;
• hurdle balances are accumulating.

Carry may therefore be:

€0

even where some investments have appreciated significantly.

This can be particularly true under conservative whole-fund methodologies.

89. Middle Fund Life

Later:

• some investments are realised;
• NAV remains substantial;
• remaining commitment declines;
• realised carry may emerge;
• unrealised carry may become material.

The carry position can become a mixture of:

Realised + Unrealised

90. Late Fund Life

Toward the end:

• most investments are realised;
• remaining commitment may be limited;
• NAV falls;
• unrealised carry converts into realised carry;
• uncertainty declines.

Ultimately:

NAV → €0

and:

Remaining Commitment → €0

At final liquidation:

Unrealised Carry → €0

because:

Total Carry = Realised Carry

subject to final adjustments.

Section AN — A Complete Carry-Life Example

91. Year 1

Contributions:

€100m

NAV:

€100m

Distributions:

€0m

Assume no carry.

Realised carry:

€0m

Total carry:

€0m

Unrealised carry:

€0m

92. Year 2

Contributions remain:

€100m

NAV:

€130m

No distributions.

Ignore hurdle for simplicity.

Total profit:

€30m

Total carry:

€6m

Realised carry:

€0m

Unrealised carry:

€6m

93. Year 3

A partial exit produces:

€60m Distribution

Remaining NAV:

€90m

Total value:

€150m

Total profit:

€50m

Total carry:

€10m

Suppose realised waterfall still supports no carry because capital has not yet been fully returned.

Realised carry:

€0m

Unrealised carry:

€10m

94. Year 4

Additional distribution:

€70m

Cumulative distributions:

€130m

NAV:

€50m

Total value:

€180m

Total carry:

€16m

Realised profit:

€30m

Realised carry:

€6m

Unrealised carry:

€10m

95. Year 5

Remaining portfolio sold for:

€50m

Cumulative distributions:

€180m

NAV:

€0m

Total carry:

€16m

Realised carry:

€16m

Unrealised carry:

€0m

The carry has migrated:

Unrealised → Realised

without changing final total carry.

Section AO — Add Remaining Commitment to the Life Cycle

96. Year 2 with Remaining Commitment

Return to Year 2:

NAV:

€130m

Remaining commitment:

€40m

Using a conservative full-deduction methodology:

Adjusted NAV:

€90m

Against €100 million historical contributions, the fund has not yet generated positive net value under this methodology.

Total carry:

€0m

Without the adjustment, total carry would have been:

€6m

The remaining commitment therefore suppresses early unrealised carry.

97. Year 3

Suppose:

NAV:

€90m

Cumulative distributions:

€60m

Remaining commitment:

€20m

Adjusted NAV:

€70m

Adjusted total value:

€130m

Profit:

€30m

At 20%:

Total Carry = €6m

The decline in remaining commitment itself can therefore contribute to an increase in total carry, even if NAV does not increase.

98. Economic Interpretation

The carry increased partly because a future funding obligation decreased.

Therefore:

Carry Movement ≠ Necessarily Portfolio Valuation Movement

Carry can move because of:

• NAV;
• realised proceeds;
• contributions;
• remaining commitments;
• hurdle accrual;
• expenses;
• waterfall-state changes.

This is why carry attribution requires a bridge rather than a simple percentage of valuation movement.

Section AP — Carry Sensitivity to Remaining Commitment

99. Scenario Table

Assume:

• historical economics otherwise unchanged;
• NAV = €100m.

Calculate adjusted NAV under different remaining commitments:

The carry response need not be linear.

As adjusted value moves through waterfall tiers, the marginal carry effect changes.

100. Boundary Analysis

Suppose:

• hurdle threshold corresponds to adjusted NAV of €70m;
• catch-up ends at €75m.

Then:

• below €70m: no carry;
• €70m–€75m: high marginal catch-up allocation;
• above €75m: residual carry rate.

A small change in remaining commitment around those values can therefore produce a large change in calculated carry.

This is precisely why boundary testing is important.

Section AQ — Forecast Method Versus Conservative Method

101. Forecast Method

A forecast methodology might model:

Remaining Commitment

↓

Expected Future Drawdowns

↓

Expected Future Investments

↓

Expected Future Returns

↓

Expected Future Expenses

↓

Expected Future Distributions

↓

Expected Ultimate Carry

This is useful for planning.

But it is highly assumption-dependent.

102. Conservative Interim Method

A conservative interim methodology might instead use:

Current NAV

−

Defined Remaining Funding Obligation

↓

Adjusted Current Economic Value

↓

Current Total Carry

This answers a narrower question.

It deliberately avoids predicting future investment performance.

103. Both Can Be Useful

There is no need to choose one methodology for every purpose.

A GP may want:

Reporting

A conservative, reproducible unrealised carry calculation.

Business planning

An expected carry forecast.

Stress testing

A downside carry scenario.

Compensation planning

A range of potential future participant entitlements.

These are different models.

The error occurs when their outputs are treated as though they answer the same question.

Section AR — Carry Scenarios

104. Downside Case

Assume:

NAV:

€100m

Apply:

20% Downside

Adjusted NAV:

€80m

Then rerun the complete waterfall.

Do not simply reduce current carry by 20%.

Because:

20% NAV Reduction ≠ Necessarily 20% Carry Reduction

105. Base Case

Use current reported NAV under the defined methodology.

Calculate total carry.

This provides the reference point.

106. Upside Case

Increase NAV by a defined amount.

Rerun the waterfall.

The incremental carry can reveal where the fund currently sits in the waterfall.

If a €1 million increase in NAV produces:

€1 million additional carry

the fund may be in a 100% catch-up tier.

If it produces:

€200,000

the fund may be in a 20% residual tier.

Thus scenario sensitivity can help diagnose waterfall state.

Section AS — Carry Delta

107. Definition

Define:

Carry Delta = Change in Carry / Change in Economic Value

This is not a contractual term.

It is a useful analytical measure.

If:

NAV increases by:

€10m

and carry increases by:

€2m

then:

Carry Delta = 20%

If carry increases by €10 million:

Carry Delta = 100%

The latter can occur during catch-up.

108. Carry Delta Is State Dependent

The same €10 million NAV increase can produce:

• €0 carry increase below hurdle;
• €10m during 100% catch-up;
• €2m in a 20% residual tier;
• another amount across a tier boundary.

Therefore:

Carry Sensitivity Is a Function of Waterfall State

not merely the headline carry percentage.

Section AT — Interim Carry and Super Carry

109. Multiple Carry Tiers

Suppose:

• base carry = 20%;
• super carry = 25% above a second performance threshold.

NAV changes can move the fund:

• below base hurdle;
• through catch-up;
• through base residual;
• through super-carry threshold.

The total-carry calculation must therefore rerun the complete piecewise waterfall.

It cannot simply apply 25% to unrealised gains once the headline super-carry threshold appears to have been reached.

110. Unrealised Super Carry

Suppose realised economics support:

€10m Carry

Current total economics support:

€18m Carry

Then:

Unrealised Carry = €8m

Part of that €8 million may arise from:

• base carry;
• catch-up;
• super carry.

There is still only one total waterfall result.

Any analytical decomposition comes afterwards.

Section AU — Interim Carry by Investor

111. Part IV Still Applies

If investors have different economic histories, unrealised carry may also differ by investor population.

The presence of NAV does not eliminate the aggregation problem.

Therefore the calculation must still determine whether:

W(A + B) = W(A) + W(B)

for the relevant interim state.

112. Remaining Commitment Can Differ by Investor

Suppose:

Investor A

NAV share:

€60m

Remaining commitment:

€10m

Investor B

NAV share:

€40m

Remaining commitment:

€20m

A simple fund-level deduction:

€100m NAV − €30m Remaining Commitment = €70m

is arithmetically correct at aggregate level.

But investor-adjusted values are:

A:

€50m

B:

€20m

Their net economic positions are no longer proportional to NAV.

If investor-level waterfalls apply, this matters.

Section AV — Interim Carry Across Parallel Vehicles

113. Aggregate First, Then Determine Total Carry

Where parallel vehicles share one economic waterfall:

Vehicle A Historical Economics

Vehicle B Historical Economics

Current NAVs

Defined Remaining-Funding Adjustments

↓

Aggregated Total Carry

Part IV's aggregation rules remain applicable.

114. Disaggregation Remains Separate

Once total carry has been calculated, it must be attributed back according to the governing economics.

Current NAV alone may not be an appropriate basis.

The relevant history may include:

• realised profits;
• realised losses;
• different investment participation;
• different hurdle balances;
• different remaining commitments.

Therefore:

Current NAV Share ≠ Necessarily Unrealised Carry Share

Section AW — Carry Available Versus Carry Accrued

115. Four Useful Measures

At an interim date, it can be useful to distinguish:

Realised Carry

Carry supported by realised economics.

Total Carry

Carry supported by the defined total economic position.

Unrealised Carry

Total Carry − Realised Carry

Carry Available for Distribution

Amount currently distributable under the governing distribution restrictions.

These measures answer different questions.

116. Example

Suppose:

Realised carry:

€12m

Total carry:

€20m

Unrealised carry:

€8m

Required escrow:

€3m

Other holdback:

€2m

Assume the €5 million restrictions apply to realised carry.

Carry available:

€12m − €3m − €2m = €7m

Thus:

• realised carry = €12m;
• unrealised carry = €8m;
• total carry = €20m;
• currently available carry = €7m.

Using the word carry without specifying which measure would be ambiguous.

Section AX — Carry Paid

117. Add Cash History

Suppose of the €7 million available:

€5m

has actually been paid.

Then:

Carry Paid = €5m

This creates another layer:

Total Carry = €20m

Realised Carry = €12m

Available Carry = €7m

Paid Carry = €5m

These amounts should not be collapsed into one field.

118. Why This Matters

Different stakeholders ask different questions.

The accountant may ask:

What carry should be recognised?

The GP treasury team may ask:

What cash can be distributed?

The carry-plan participant may ask:

What amount has been allocated to me?

The LP may ask:

How much carry has the GP received?

The clawback model may ask:

How much carry has actually been distributed and could potentially require repayment?

These are related but distinct measures.

Section AY — A Comprehensive Interim Carry Case

119. Fund Facts

Assume:

Commitments: €500m

Historical contributions:

€350m

Historical distributions:

€300m

Current NAV:

€220m

Remaining commitment:

€100m

Assume the relevant methodology deducts the full remaining commitment from NAV.

Adjusted NAV:

€120m

Adjusted total value:

€420m

Against historical contributions of €350 million:

Adjusted profit:

€70m

Assume:

• relevant preferred-return requirement = €40m;
• 100% catch-up;
• 20% carry.

120. Total Carry

Profit:

€70m

Preferred return:

€40m

Full catch-up required:

€10m

Remaining profit:

€20m

Residual carry:

€4m

Total carry:

€14m

Check:

€14m / €70m = 20%

121. Realised Carry

Using realised distributions only:

Contributions:

€350m

Distributions:

€300m

Capital has not yet been fully returned.

Assume therefore:

Realised Carry = €0m

Then:

Unrealised Carry = €14m

122. Ignore Remaining Commitment

Now calculate without the conservative adjustment.

NAV:

€220m

Total value:

€520m

Profit:

€170m

Preferred return:

€40m

Catch-up:

€10m

Remaining:

€120m

Residual carry:

€24m

Total carry:

€34m

Thus:

Without remaining commitment adjustment:

€34m

With adjustment:

€14m

Difference:

€20m

The €100 million remaining commitment reduces carry by €20 million because both calculations are beyond the catch-up tier.

Section AZ — Move the Same Example Toward the Boundary

123. Lower NAV

Suppose current NAV is only:

€170m

Remaining commitment remains:

€100m

Adjusted NAV:

€70m

Adjusted total value:

€370m

Historical contributions:

€350m

Profit:

€20m

Preferred-return requirement:

€40m

The fund remains below the hurdle.

Total carry:

€0m

Without the remaining-commitment adjustment:

Total value:

€470m

Profit:

€120m

Carry after full catch-up:

€24m

Thus the methodology changes total carry from:

€24m → €0m

This illustrates why remaining commitment treatment can be one of the largest judgement points in unrealised carry.

Section BA — Wrong Calculations That Look Plausible

124. Wrong: Unrealised Carry = 20% × Unrealised Profit

This ignores:

• realised history;
• hurdle state;
• catch-up;
• losses;
• expenses;
• previous carry.

Correct approach:

Calculate Total Carry

then:

Subtract Realised Carry

125. Wrong: NAV Alone Determines Total Carry

NAV is only one component.

The calculation may also require:

• realised distributions;
• contributions;
• remaining commitments;
• fees;
• expenses;
• write-offs;
• other economic events.

Therefore:

NAV ≠ Total Economic History

126. Wrong: Remaining Commitment Is Always Irrelevant Because It Has Not Been Called

The investor may still have a contractual future funding obligation.

Ignoring it can overstate the current net economic position.

127. Wrong: Remaining Commitment Must Always Be Deducted in Full

Full deduction is a methodology.

It is not a universal economic law.

Another governing methodology may require:

• hypothetical drawdown;
• partial adjustment;
• another treatment.

The calculation specification must state which approach applies.

128. Wrong: NAV Deduction and Hypothetical Drawdown Are Always Equivalent

They may produce the same result in a simple non-time-based waterfall.

They can diverge when:

• preferred return;
• IRR;
• MOIC;
• timing-sensitive tiers

are involved.

Therefore:

Same Net Economic Value ≠ Necessarily Same Waterfall Result

129. Wrong: Total Carry Is Distributable Carry

Total carry can include substantial unrealised carry.

It may not be legally or economically available for distribution.

Therefore:

Total Carry ≠ Carry Available for Distribution

130. Wrong: Realised Carry Equals Carry Paid

Escrow, holdbacks and timing can create differences.

Therefore:

Realised Carry ≠ Carry Paid

131. Wrong: Negative Unrealised Carry Means Immediate Clawback

Negative unrealised carry may indicate that current total carry is below realised carry.

Whether this creates:

• immediate repayment;
• future withholding;
• escrow use;
• end-of-fund clawback

depends on the governing provisions.

Part VI addresses that reconciliation.

Section BB — Reconciliation Framework

132. The Core Carry Identity

At each calculation date:

Total Carry = Realised Carry + Unrealised Carry

Therefore:

Unrealised Carry = Total Carry − Realised Carry

This should reconcile exactly, subject only to defined rounding.

133. Carry Distribution Reconciliation

A second bridge may be:

Realised Carry

=

Carry Paid

Carry Retained

Other Defined Undistributed Realised Carry

subject to the fund's terminology and mechanics.

134. Total Economic Value Reconciliation

For a simplified interim calculation:

Realised Distributions

Adjusted Remaining Value

=

Total Economic Value Used in Waterfall

Every adjustment between reported NAV and adjusted remaining value should be visible and explainable.

135. NAV Adjustment Bridge

For example:

Reported NAV

€220m

Less remaining commitment adjustment:

(€100m)

Adjusted NAV:

€120m

If other adjustments exist, each should appear separately.

Do not bury them inside a single manually entered carry value.

Section BC — Carry Movement Reconciliation

136. Opening to Closing Carry

Suppose:

Opening total carry:

€12m

Closing total carry:

€18m

Movement:

€6m

The model should explain the movement.

Potential drivers:

• realised gains;
• realised losses;
• NAV changes;
• new contributions;
• distributions;
• remaining-commitment changes;
• preferred-return accrual;
• expenses;
• FX;
• waterfall-tier transitions.

137. Attribution Is Not Necessarily Linear

If:

• NAV increased €20m;
• remaining commitment decreased €10m;
• preferred return increased €3m,

it may be tempting to calculate each carry effect independently and add them.

But waterfall non-linearity can create interaction effects.

Therefore the exact attribution may depend on the order or methodology used for the bridge.

A reconciliation methodology should define that explicitly.

Section BD — Scenario Controls

138. Zero NAV

Set:

NAV = €0

Does total carry reduce to the carry supported by the remaining realised economics and other defined adjustments?

If not, investigate.

139. Zero Remaining Commitment

Set:

Remaining Commitment = €0

The adjustment should disappear.

This provides a useful boundary test.

140. NAV Equals Remaining Commitment

Suppose:

NAV:

€50m

Remaining commitment:

€50m

Under a full-deduction methodology:

Adjusted NAV:

€0m

This is a useful test of the model's treatment of the remaining fund value.

141. Remaining Commitment Exceeds NAV

Suppose:

NAV:

€40m

Remaining commitment:

€60m

Simple subtraction produces:

(€20m)

The calculation specification must define whether negative adjusted value is permitted and, if so, how it enters the waterfall.

This should not be left to accidental spreadsheet behaviour.

Section BE — Boundary Controls

142. Hurdle Boundary

Calculate NAV required to place the fund:

• €1 below hurdle;
• exactly at hurdle;
• €1 above hurdle.

Verify expected carry behaviour.

143. Catch-Up Boundary

Likewise test:

• immediately before catch-up completes;
• exactly when catch-up completes;
• immediately after.

This is particularly important for unrealised carry because NAV movements can move the fund rapidly through the catch-up tier.

144. Super-Carry Boundary

If applicable, test total carry:

• below super-carry threshold;
• exactly at threshold;
• above threshold.

Do not assume that a valuation change above the threshold simply receives the higher percentage unless that matches the actual super-carry architecture.

Section BF — Reproducibility

145. Calculation Date Matters

Every interim carry result should identify:

Calculation Date

because:

• NAV changes;
• hurdle accrues;
• contributions occur;
• distributions occur;
• remaining commitment changes.

A carry amount without a calculation date is incomplete.

146. Valuation Source Matters

The calculation should identify the NAV source.

For example:

• administrator NAV;
• approved quarterly valuation;
• internal estimate;
• transaction value;
• another defined source.

The calculation engine should not silently substitute one valuation source for another.

147. Assumption Set Matters

The result should identify:

• remaining-commitment methodology;
• hypothetical liquidation methodology;
• valuation date;
• FX methodology;
• treatment of recallable distributions;
• treatment of subscription facilities;
• other material assumptions.

Therefore:

Carry Result + Calculation Date + Methodology = Reproducible Result

Section BG — A Calculation Specification for Interim Carry

148. Required Questions

Before implementing total and unrealised carry, define:

Realised population

Which events enter realised carry?

NAV

Which valuation is used?

Hypothetical liquidation

How is NAV introduced into the waterfall?

Remaining commitment

Is it:

• ignored;
• deducted from NAV;
• introduced as hypothetical drawdown;
• treated another way?

Investment period

Does treatment change after the investment period?

Recallable distributions

Do they increase the relevant future funding obligation?

Subscription facilities

Are outstanding liabilities already included in NAV?

Escrow and holdbacks

Do they affect carry generation or only availability?

Tax advances

How are prior tax payments classified?

Investor and vehicle populations

At what level is the calculation performed?

Only after these questions are answered can the calculation be reproduced reliably.

Section BH — End-to-End Worked Example

149. Fund History

Assume a fund has:

Commitments: €300m

Historical contributions:

€220m

Historical realised distributions:

€190m

Current NAV:

€140m

Remaining commitment:

€50m

Relevant preferred-return requirement:

€30m

Carry:

20%

Full catch-up.

Carry already distributed:

€4m

Carry held in escrow:

€1m

Assume full remaining commitment is deducted from NAV.

150. Adjusted NAV

Reported NAV:

€140m

Less remaining commitment:

€50m

Adjusted NAV:

€90m

Total adjusted economic value:

€190m + €90m = €280m

Historical contributions:

€220m

Adjusted profit:

€60m

151. Total Carry

Preferred return:

€30m

Full catch-up required:

€7.5m

because:

20% / 80% × €30m = €7.5m

Remaining profit:

€60m − €30m − €7.5m = €22.5m

Residual carry:

20% × €22.5m = €4.5m

Total carry:

€7.5m + €4.5m = €12m

Check:

€12m / €60m = 20%

152. Realised Carry

Realised distributions:

€190m

Historical contributions:

€220m

Capital has not yet been fully returned.

Under the simplified assumptions:

Realised Carry = €0m

Therefore:

Unrealised Carry = €12m

153. But Carry Has Already Been Distributed

Carry paid:

€4m

Escrow:

€1m

This creates an important issue.

Under the simplified realised waterfall:

Realised Carry = €0m

yet carry-related cash or allocations already exist.

This can occur only because the actual governing structure permits interim distributions or uses a different realised-carry definition than our simplified example.

The apparent inconsistency is therefore a control signal.

It tells us to return to the governing provisions.

This is precisely what a robust model should do.

Section BI — A More Consistent Interim Distribution Example

154. Revised Realised Economics

Suppose instead:

Historical contributions:

€180m

Realised distributions:

€220m

NAV:

€100m

Remaining commitment:

€30m

Preferred-return requirement on realised economics:

€20m

Full catch-up.

155. Realised Carry

Realised profit:

€40m

Preferred return:

€20m

Catch-up:

€5m

Remaining:

€15m

Residual carry:

€3m

Realised carry:

€8m

Check:

€8m / €40m = 20%

156. Total Carry

Adjusted NAV:

€100m − €30m = €70m

Adjusted total value:

€220m + €70m = €290m

Profit:

€110m

Assume the relevant total preferred-return requirement remains €20 million for this simplified example.

Catch-up:

€5m

Remaining profit:

€85m

Residual carry:

€17m

Total carry:

€22m

Therefore:

Unrealised Carry = €22m − €8m = €14m

157. Carry Availability

Suppose:

Realised carry:

€8m

Escrow requirement:

€2m

Carry available:

€6m

Carry actually paid:

€5m

Then:

• total carry = €22m;
• realised carry = €8m;
• unrealised carry = €14m;
• escrow = €2m;
• available realised carry = €6m;
• paid carry = €5m;
• additional currently available but unpaid carry = €1m.

Each number answers a different question.

Section BJ — The Interim Carry Dashboard

158. Useful Measures

A robust interim carry report might display:

This makes the economic bridge visible.

It is far more informative than reporting only:

Carry = €22m

Section BK — What Part V Has Established

159. Realised, Total and Unrealised Carry Are Different Measures

The central relationship is:

Unrealised Carry = Total Carry − Realised Carry

Therefore:

Unrealised Carry Is a Residual, Not an Independent Waterfall

This ensures that unrealised value is evaluated within the complete cumulative waterfall architecture.

160. NAV Does Not Stand Alone

NAV must be combined with the relevant historical economics.

Therefore:

Current NAV ≠ Complete Waterfall State

and:

Accounting NAV ≠ Automatically Waterfall Liquidation Value

The calculation methodology must define how NAV enters the waterfall.

161. Remaining Commitment Can Be Economically Material

A current NAV may coexist with a substantial future funding obligation.

Therefore:

Current NAV ≠ Net Liquidation Value if Future Contractual Funding Obligations Remain

A conservative methodology may use:

Adjusted Hypothetical Value = NAV − Relevant Remaining Commitment

but this is a defined methodology rather than a universal rule.

162. NAV Deduction and Hypothetical Drawdown Are Different Operations

Deducting remaining commitment from NAV changes value.

Introducing a hypothetical drawdown creates a new economic event.

In a simple waterfall they may produce the same result.

In a time-sensitive waterfall they may not.

Therefore:

Same Net Economic Value ≠ Necessarily Same Waterfall Result

163. Fund-Life Stage Matters

A remaining commitment during the investment period can have a different expected economic character from the same nominal commitment after the investment period.

Therefore:

Same Remaining Commitment ≠ Same Expected Future Economics

A conservative methodology may deliberately avoid forecasting those differences.

164. Conservative Does Not Mean Expected

A conservative calculation can be valuable precisely because it does not attempt to forecast future investment success.

The objective can be:

Simple + Objective + Reproducible + Conservative + Defendable

rather than:

Most Likely Ultimate Outcome

Therefore:

Conservative Outcome ≠ Expected Outcome

and:

Unrealised Carry Calculation ≠ Forecast of Ultimate Carry

165. Carry Can Move Without NAV Moving

Carry can change because of:

• realisations;
• new contributions;
• preferred-return accrual;
• remaining-commitment changes;
• expenses;
• recycling;
• FX;
• waterfall-state transitions.

Therefore:

Carry Movement ≠ NAV Movement × Carry Percentage

The entire waterfall must be recalculated.

166. Realisation Can Change Carry Classification Without Changing Total Carry

When an investment is realised at its previous NAV:

Unrealised Carry → Realised Carry

while:

Total Carry May Remain Unchanged

This provides one of the most useful reconciliation relationships in interim carry reporting.

167. Carry Generation and Carry Cash Must Remain Separate

Part V has distinguished:

Total Carry

Realised Carry

Unrealised Carry

Carry Available for Distribution

Carry Retained

Carry Paid

These measures should not be collapsed.

They represent different stages of the economic and cash process.

168. Interim Carry Is a State Calculation

At every reporting date:

Historical Events

Current Valuations

Defined Interim Adjustments

Contractual Waterfall Rules

=

Current Carry State

That state can increase or decrease.

It remains provisional until the fund's economics are finally resolved.

169. Transition to Part VI

Part V has deliberately stopped before answering one final question.

Suppose:

• carry was correctly calculated at an earlier date;
• some or all of it was distributed;
• subsequent investments perform badly;
• total carry falls;
• the fund ultimately supports less carry than the GP has already received.

What happens then?

The answer is clawback.

Clawback is not a separate economic universe.

It is the final reconciliation between interim carry and final fund economics.

Conceptually:

Interim Carry Distributed

↓

Subsequent Economic Events

↓

Final Waterfall Calculation

↓

Final Carry Entitlement

↓

Reconciliation

The starting relationship is:

Carry Previously Distributed − Final Carry Entitlement = Potential Clawback

But even this apparently simple formula introduces additional questions:

• Is clawback measured gross or net of tax?
• Is it tested only at fund termination or also during the fund life?
• Can a whole-fund waterfall still produce clawback?
• Which carry recipients must repay?
• What happens when participants have left?
• Are repayment obligations several, joint or capped?
• How do escrow and holdbacks interact with clawback?
• What if calculated clawback exceeds recoverable clawback?
• How is participant-level repayment allocated?
• How does GP clawback differ from LP giveback?
• How are FX and rounding handled?
• How is the complete fund history reconciled?

Part VI will therefore complete the waterfall lifecycle.

It moves from:

Current Carry State

to:

Final Economic Reconciliation

and establishes the final distinction:

Carry Previously Distributed ≠ Carry Ultimately Earned

The waterfall determines the economic entitlement.

Clawback reconciles the cash already distributed with that final entitlement.

Need assistance with your Carried Interest Challenges? Reach out to us:

[email protected]

Or ask your questions here:

References and Further Reading

Carried Interest, Interim Carry and Waterfall Mechanics

• Stefanova, Mariya (ed.). The Definitive Guide to Carried Interest. Private Equity International, 2017. See particularly the chapters addressing carried-interest waterfalls, realised and unrealised carried interest, preferred returns, catch-up, clawback and the practical implementation of carried-interest calculations.
• Draisma, Gert-Tom. “Using Technology to Calculate and Recognise Carried Interest on the GP Side.” In Mariya Stefanova (ed.), The Definitive Guide to Carried Interest. Private Equity International, 2017, Chapter 11. See particularly the discussion of translating fund economics into repeatable calculations, sourcing the required cash-flow data and calculating realised and unrealised carried interest.
• Institutional Limited Partners Association (ILPA). ILPA Principles 3.0: Fostering Transparency, Governance and Alignment of Interests for General and Limited Partners. 2019. See particularly the sections concerning distribution waterfalls, carried interest, recycling, clawback, escrow, NAV coverage and interim clawback tests.
• Invest Europe. Professional Standards Handbook. See particularly “Terms in the Fund Documents” and “Managing Your Relationship with LPs” for carried-interest arrangements, catch-up, escrow, clawback, true-up, distributions and investor reporting.

Realised, Unrealised and Total Carry

• Invest Europe. Investor Reporting Guidelines. 2024. See particularly “Fund Information” and “Investor Information.” The Guidelines distinguish carried interest earned from realised investments from carried interest attributable to unrealised investments and provide for disclosure of unrealised carried interest assuming investments are realised at their reported fair value.
• Invest Europe. Investor Reporting Guidelines — Fund Information. 2024. See the section “GP Fees, Carried Interest and Fund Operating Expenses,” including disclosure of realised carried interest, amounts distributed, amounts held in escrow, unrealised carried interest based on current fair value and potential clawback.
• Invest Europe. Investor Reporting Guidelines — Investor Information. 2024. See the requirements concerning realised and unrealised portfolio gains and losses, allocations to the carried-interest partner, investor NAV and unrealised carried interest attributable to the GP.
• Institutional Limited Partners Association (ILPA). Reporting Template Version 2.0 — Definitions and Suggested Guidance. 2025. See particularly the NAV reconciliation, carried-interest, contributions, distributions and unfunded-commitment definitions.

Net Asset Value and Hypothetical Realisation

• International Private Equity and Venture Capital Valuation Board (IPEV). International Private Equity and Venture Capital Valuation Guidelines. Current edition. Reference source for fair-value principles applicable to private capital investments and the valuation of unrealised portfolio positions.
• Invest Europe. Investor Reporting Guidelines. 2024. See particularly the requirements concerning total fair value of the current portfolio, cash, borrowings, other assets and liabilities, total NAV, realised and unrealised gains and losses, and carried interest attributable to unrealised investments.
• IFRS Foundation / International Accounting Standards Board. IFRS 13 — Fair Value Measurement. Reference source for the principles governing fair-value measurement where IFRS is the applicable accounting framework.
• Financial Accounting Standards Board. ASC Topic 820 — Fair Value Measurement. Reference source for fair-value measurement where U.S. GAAP is the applicable accounting framework.

Remaining Commitments and Unfunded Commitments

• Invest Europe. Investor Reporting Guidelines — Fund Information. 2024. See the Fund Performance Status requirements concerning total commitments, cumulative paid-in capital, total unfunded commitments available for capital calls, recallable distributions, current portfolio fair value, borrowings, liabilities and NAV.
• Invest Europe. Investor Reporting Guidelines — Investor Information. 2024. See the investor-level requirements concerning total commitment, total contributions, unfunded commitment, outstanding bridge financing, recallable distributions and capital-account NAV.
• Invest Europe. Investor Reporting Guidelines — Investment Portfolio Information. 2024. See particularly the requirements for fund-of-funds reporting of commitments, contributions, distributions, remaining unfunded commitments and NAV, together with the additional disclosure of exposure measured using NAV plus uncalled commitments.
• Institutional Limited Partners Association (ILPA). Reporting Template Version 2.0 — Definitions and Suggested Guidance. 2025. See particularly the definitions and reconciliation requirements concerning unfunded commitments, contributions, distributions and NAV.

Investment Period and Future Funding Obligations

• Invest Europe. Investor Reporting Guidelines — Fund Information. 2024. See the required disclosure of the investment-period criteria and end date, the last date on which capital may be called, reinvestment and recycling policies, commitments and unfunded commitments.
• Invest Europe. Professional Standards Handbook — Terms in the Fund Documents. See particularly the provisions concerning commitments, drawdowns, investment period, fund term, distributions, carried interest and liquidation.
• Institutional Limited Partners Association (ILPA). ILPA Principles 3.0. 2019. See particularly the guidance concerning recycling of distributions, recallable capital, investment-period limitations and LP cash requirements.

Recycling and Recallable Distributions

• Institutional Limited Partners Association (ILPA). ILPA Principles 3.0. 2019. See the section “Recycling of Distributions,” including guidance concerning caps or monitoring thresholds for recycling and the treatment of unused recallable distributions.
• Invest Europe. Investor Reporting Guidelines — Fund Information. 2024. See the disclosure requirements concerning reinvestment and recycling policies, unfunded commitments and recallable distributions.
• Invest Europe. Investor Reporting Guidelines — Investor Information. 2024. See the requirements concerning cumulative distributions and the amount of those distributions that remain recallable at the reporting date.

Subscription Facilities and Bridge Financing

• Institutional Limited Partners Association (ILPA). Subscription Lines of Credit and Alignment of Interests: Considerations and Best Practices for Limited and General Partners. 2017. See particularly the discussion of subscription facilities, capital-call timing, preferred-return calculations, investor performance and transparency.
• Institutional Limited Partners Association (ILPA). ILPA Principles 3.0. 2019. See the principles concerning subscription facilities, fund leverage, alignment of interests, transparency and the calculation of fund performance.
• Invest Europe. Investor Reporting Guidelines — Fund Information. 2024. See the disclosure requirements concerning bridge-finance facilities, fund leverage, borrowings, facility terms and their effect on fund performance.
• Invest Europe. Investor Reporting Guidelines — Investor Information. 2024. See the requirement to disclose each LP’s share of outstanding bridge financing together with commitments, contributions and unfunded commitments.

Distributions in Kind

• Invest Europe. Professional Standards Handbook — Managing Your Relationship with LPs. See the guidance concerning distributions in specie, their treatment under the fund documents and the basis on which such distributions should be valued.
• Institutional Limited Partners Association (ILPA). Reporting Template Version 2.0 — Definitions. 2025. See the definitions of contributions and distributions, which include cash, non-cash and deemed transactions.
• International Private Equity and Venture Capital Valuation Board (IPEV). International Private Equity and Venture Capital Valuation Guidelines. Current edition. Reference source for valuation principles relevant where securities or other investments are distributed in kind.

Escrow, Holdbacks and Carry Available for Distribution

• Institutional Limited Partners Association (ILPA). ILPA Principles 3.0. 2019. See particularly the clawback guidance concerning escrow arrangements, NAV coverage tests, interim clawbacks and protection against future clawback liabilities.
• Invest Europe. Investor Reporting Guidelines — Fund Information. 2024. See the requirement to disclose realised carried interest, the amount distributed and any undistributed carried interest held in escrow.
• Invest Europe. Professional Standards Handbook — Terms in the Fund Documents. See the provisions concerning carried-interest arrangements, including the rate, basis of calculation, catch-up, escrow, clawback and true-up provisions.

Tax Distributions and Tax Effects

• Stefanova, Mariya (ed.). The Definitive Guide to Carried Interest. Private Equity International, 2017. See the discussion of carried-interest distributions, taxation, clawback and the interaction between tax and carry economics.
• Institutional Limited Partners Association (ILPA). ILPA Principles 3.0. 2019. See particularly the clawback provisions concerning gross-of-tax and net-of-tax calculations, hypothetical marginal tax rates and the treatment of tax effects in clawback calculations.

Clawback and Interim Carry

• Institutional Limited Partners Association (ILPA). ILPA Principles 3.0. 2019. See the section “Clawback.” ILPA addresses actual and potential clawback liabilities, periodic disclosure, gross- and net-of-tax calculations, repayment obligations, interim clawback triggers, NAV coverage, escrow and guarantees.
• Invest Europe. Professional Standards Handbook — Terms in the Fund Documents. See the guidance concerning carried-interest arrangements, escrow, clawback and true-up provisions.
• Invest Europe. Professional Standards Handbook — Managing Your Relationship with LPs. See the guidance concerning distributions, carried-interest calculations, recallable distributions and GP clawback provisions.
• Invest Europe. Investor Reporting Guidelines — Fund Information. 2024. See the reporting requirements concerning realised carry, unrealised carry, escrow and potential carried-interest clawback.

Investor-Level Interim Carry

• Invest Europe. Investor Reporting Guidelines — Investor Information. 2024. See the requirements concerning individual investor commitments, contributions, unfunded commitments, bridge-financing allocations, distributions, recallable distributions, realised and unrealised gains and losses, carried-interest allocations and NAV.
• Institutional Limited Partners Association (ILPA). Reporting Template Version 2.0 — Definitions and Suggested Guidance. 2025. See particularly the distinction between the LP’s allocation, total-fund balances and the GP’s allocation, including carried interest.
• Institutional Limited Partners Association (ILPA). ILPA Principles 3.0. 2019. See particularly the principles concerning investor-specific economics, transparency, side letters, allocations and consistent treatment of investors.

Parallel Vehicles and Whole-Fund Reporting

• Invest Europe. Investor Reporting Guidelines — Fund Information. 2024. See the requirement to disclose total commitments for the whole fund, including parallel partnerships and the GP commitment, together with separate disclosure of constituent structures.
• Invest Europe. Investor Reporting Guidelines — Investor Information. 2024. See the guidance concerning whole-fund information where a fund consists of parallel structures.
• Institutional Limited Partners Association (ILPA). Reporting Template Version 2.0 — Definitions. 2025. See the definition of “Total Fund,” which encompasses the cumulative interest of the private fund, including side and parallel vehicles where applicable under the reporting framework.

Interim Carry Reporting and Reconciliation

• Institutional Limited Partners Association (ILPA). Reporting Template Version 2.0. 2025. See particularly the NAV reconciliation, carried-interest, management-fee, fee-offset, contribution, distribution and unfunded-commitment reporting requirements.
• Institutional Limited Partners Association (ILPA). Reporting Template Version 2.0 — Suggested Guidance. 2025. See the guidance that NAV, carried interest, fee offsets, management fees, unfunded commitments and capital-call and distribution amounts should reconcile consistently with the fund’s other financial reporting.
• Invest Europe. Investor Reporting Guidelines. 2024. See particularly the guidance concerning reconciliation between audited accounts and investor reporting, whole-fund reporting, investor capital accounts and carried-interest disclosure.
• Invest Europe. Investor Reporting Guidelines — Fund Information. 2024. See the Fund Performance Status requirements for commitments, paid-in capital, unfunded commitments, distributions, fair value, borrowings, NAV, IRR, DPI, RVPI and TVPI.

Performance Measurement

• Invest Europe. Investor Reporting Guidelines — Performance Measurement and Reporting. 2024. See the guidance concerning IRR, multiples, cash flows, NAV and performance reporting.
• Institutional Limited Partners Association (ILPA). Performance Template. Current edition. Reference framework for standardised presentation of private-fund cash flows and performance information.
• Global Investment Performance Standards (GIPS). GIPS Standards for Firms. CFA Institute. See the provisions and guidance applicable to private-market investment performance measurement and presentation.

Accounting and Financial Reporting

• American Institute of Certified Public Accountants (AICPA). Audit and Accounting Guide: Investment Companies. Current edition. See particularly the guidance concerning investment-company accounting, fair value, partners’ capital, allocations and financial reporting.
• IFRS Foundation / International Accounting Standards Board. IFRS 13 — Fair Value Measurement. Current edition.
• IFRS Foundation / International Accounting Standards Board. IFRS 10 — Consolidated Financial Statements. See particularly the provisions concerning investment entities.
• Financial Accounting Standards Board. ASC Topic 946 — Financial Services — Investment Companies. Current edition.
• Financial Accounting Standards Board. ASC Topic 820 — Fair Value Measurement. Current edition.

Further Reading

• Phalippou, Ludovic. Private Equity Laid Bare. Routledge. See particularly the discussion of private-equity cash flows, NAV, fees, carried interest and performance measurement.
• Metrick, Andrew and Ayako Yasuda. Venture Capital and the Finance of Innovation. Wiley. See particularly the treatment of fund economics, management fees, carried interest, commitments and private-fund cash flows.
• Gompers, Paul A. and Josh Lerner. The Venture Capital Cycle. MIT Press. See the discussion of limited-partnership structures, commitments, distributions, GP compensation and investor economics.
• Robinson, David T. and Berk A. Sensoy. “Do Private Equity Fund Managers Earn Their Fees? Compensation, Ownership, and Cash Flow Performance.” The Review of Financial Studies, Vol. 26, No. 11, 2013, pp. 2760–2797.
• Kaplan, Steven N. and Antoinette Schoar. “Private Equity Performance: Returns, Persistence, and Capital Flows.” The Journal of Finance, Vol. 60, No. 4, 2005, pp. 1791–1823.

The Carried Interest Bible © 2026 Table Bay Investments Ltd, All rights reserved.