sophisticated carry structure question

If you want a quick and specific tactic and you think you can get away with it, try a tiered carry: for example 20% carry from 8-20% IRR (?), 25% from 20-30%, 30% for anything above 30%. People in general are super fee conscious now so it would be difficult to do this unless you're coming off a few funds that hit grand slams and you're actually turning people away from your new fund. I've never done this because I've only been involved with institutional or ultra high net worth investors (if they don't have a true family office they have a team that screens anything they do and those guys are sophisticated and would catch anything out of the ordinary) so I don't know how a retail fund works (and almost what you mean by it), but you can't pull anything past the investors I've dealt with because they're cramming down fees and it's getting tougher for the sponsors overall so you can propose this but in my world it will get shot down instantly. I don't have any copy/paste language from PPM's or subscription agreements for this because I've never been somewhere where it's even been attempted.

You could also try to turn back the clock and go for a pure American style carry with no clawbacks. For example and to make it extreme, you're able to exit deal 1 very quickly and make a massive return so you take your 20% carry from that, put it in your pockets and buy sports cars and the proverbial hookers and blow, deals 2-10 all suck and you don't hit your hurdles, but you don't have to reserve deal 1's big return for all of the lemon's you had. But at least you have a 7 year old Ferrari and fond memories of a weeklong bender. This won't fly at all in my world, but I have no idea about retail investors.

You can also try to add in fees that were more common 10 or 15+ years ago and not have them offset the main management fee (the 2) or have to share/give them to the LP's, such as acquisition fees, financing fees, portfolio management fees, etc. But like I said, you can't get away with that in the institutional world today.

So if I understand correctly you're getting a 10% sales fee taken off the top so you're talking about committed capital as 100 and invested capital as a max of 90, not committed vs invested capital as in the LP's have committed 100 on day 0 and as you've made investments that becomes invested capital? I'm a little confused on the arb you're looking for. You don't want to have to include placement agent/sales fees and add your 2% management fee into the invested capital portion?

If that sales fee is in house or with an affiliate, just have a big party and don't try anything other than a standard 2/20.

There's not much that's illegal to do in GP/LP commingled funds (yes, there's the obvious) with regard to fees and profit sharing/carries. It's much more about what the market will bear. But like I said, I'm not familiar with a retail fund and who the investors would even be.