Hedge fund carried interest refers to the share of profits that fund managers receive as compensation for their performance. Typically, managers are entitled to a portion (often 20%) of the fund’s profits after certain thresholds or performance benchmarks are met. This incentive structure aligns the interests of fund managers with those of investors, motivating the managers to maximize returns. The treatment of carried interest as capital gains, rather than ordinary income, has been a subject of significant debate in the U.S., particularly regarding tax implications and fairness in the financial industry. Hedge fund carried interest refers to the portion of profits that hedge fund managers receive as performance compensation. It incentivizes strong investment returns.
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