A fund manager is incented to generate profits for his investors by getting a share of those profits as a carried interest. Other common terms are performance allocation, incentive fee, profit share, profit participation, or performance. Whichever technical term you want to use, it’s the fund manager’s bonus for doing a good job. Many times the general partner entity is the one that is entitled to the fee. There should be an alignment of this fee with the overall strategy and operation of the fund, just as the management fee is aligned with your need to support your operations. Expect to see this carried interest to be about 20% of the year’s profits.