What is carry paid out on?
There's been some posts on carry points assigned to individual members of a PE fund, but haven't seen anything on what actually is paid in carry or when it's paid. Most (all) funds have a high hurdle rate of 8%, and with a 10 year life of a fund that would mean the fund would have to get to 2.16x (8% compounded over 10 years) until any carry is paid out. Is that the right way to think about it?
I would assume that once you return some money from a sale of a company the 8% stops on the dollars invested in a deal, so that would help lower the 2.16x mark?
Also, when does carry actually get paid out? I would assume the fund wouldn't have to return 2.16x to begin receiving carry distributions? Is there a point when they could pay it out, maybe at 1.0x of capital returned with a belief that the fund will hit the high water mark?
Any advice would be helpful!