Carried interest (or "carry") is the share of investment profits paid to fund managers — typically hedge fund, private equity, or venture capital managers — as compensation for their work. The standard carry is 20% of profits, meaning the manager keeps 20 cents of every dollar of profit generated for investors.
Carried interest is taxed at the lower capital gains rate (rather than ordinary income rates) in most jurisdictions, a tax treatment that is frequently debated. This favorable treatment is one reason why many top fund managers have accumulated enormous wealth.
For the most successful fund managers — like Steve Schwarzman (Blackstone) or Stephen Cohen (Point72) — carried interest over decades has created billions in personal wealth.