Carried Interest
Also called: carry, 2 and 20, performance allocation
Carried interest is the share of profits a fund manager keeps, conventionally 20% above a hurdle. It's the main source of wealth in venture and private equity, and its tax treatment as capital gain rather than income is one of the longest-running arguments in tax policy. Because carry only pays above a hurdle, a mediocre fund earns its managers management fees and nothing else.