PRACTICE · LEVEL 2 · ABOUT 8 MIN
Not triedFund returns: gross versus net
An investor commits $100M. Over the fund's life $10M goes to management fees and the rest is invested. Investments return 2.5× what was invested.
The manager takes 20% carried interest on profit above the investor's total contribution. Treat everything as paid in at the start and out after 5 years.
Assumptions
- Simplified: one contribution, one distribution, no preferred return or catch-up.
- Gross returns are on invested capital; net returns are on everything the investor paid.
Set 1 of 3