Explain Carry in simple terms
So I understand the basis of it but can anyone use a ELI5 real life example of how much someone can potentially earn with it at a shop? Take say someone in a position with equivalent to “entry level” carry (maybe a Director?) not an MD.
For example, really simple one.., if the said person receives X% carry and the firm acquires a $50MM asset. They then sell it in 5 years for $60MM. That firm is GP with 10% in the deal or $5MM of initial equity. Let’s say no debt to make it simple. So the GP profit before any closing costs are then $6MM. How much does that person then earn? Is it part of a YE bonus?
Hi Associate 1 in RE - Comm, any of these threads helpful:
More suggestions...
Hope that helps.
You’re kind of halfway there with your example.
Your math is a bit hard to follow - but the idea is:
capital first before the IRR is positive.
Look up “fund / LP waterfall models” and it’ll lay it out for you
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