Model the classic 2-and-20 structure. Enter your fund size, management fee, carry, hurdle and expected gross MOIC to see total management fees, carried interest to the GP, net LP proceeds, and the GP’s total economics — computed live with a European (whole-fund) waterfall.
Net LP IRR is a single-realization approximation over a 10-year term; real IRR depends on deployment and distribution timing.
“2 and 20” is shorthand for the fee structure that has anchored private funds for decades: a 2% annual management fee on committed capital, plus 20% carried interest on profits. The management fee is the predictable part — on a $50M fund at 2%, that is $1M a year, roughly $10M over a ten-year life, and it pays for the team and the work of finding and managing deals. Carried interest is the variable, upside part: the GP’s 20% share of the money the fund makes above what LPs put in.
The order in which money comes back matters as much as the percentages. This calculator uses a European, whole-fund waterfall: distributions first return all committed capital to LPs, then pay a preferred return (the hurdle) if one is set, then a GP catch-up, and finally split the remainder 80/20. Only after LPs are whole — and past the hurdle — does the GP’s carry begin to accrue in full.
Take a $50M fund, 2% fee, 20% carry, 8% hurdle, a ten-year term and a 2.5x gross MOIC. Management fees total about $10M over the life. Gross proceeds are $125M, so gross profit is $75M. LPs first get their $50M back and clear the preferred return; the GP then catches up and, because the fund comfortably beats the hurdle, ends up with close to 20% of the $75M profit — around $15M of carry. Add the fees and the GP’s total economics land near $25M, while LPs keep their capital plus roughly $60M of profit before fee drag. Change any input and watch every figure move.
For a first- or second-time fund manager, this math is a fundraising tool. LPs negotiate on fee, carry and hurdle, and every point moves the outcome. Modeling it before those conversations tells you how large a fund needs to be to actually sustain a team on the management fee alone, how much of the real reward is back-loaded into carry, and where you have room to offer LP-friendly terms without starving the firm. Walking into a meeting able to speak fluently about your own economics signals that you understand the business you are asking someone to fund.
This is a simplified model, not a fund accounting system. It applies gross MOIC to committed capital, computes carry on gross profit through a European whole-fund waterfall, and then treats management fees as drag on LP net proceeds. It ignores capital recycling, fee offsets, the timing of capital calls and distributions, GP clawback, and taxes. A deal-by-deal (American) waterfall would pay the GP carry earlier. The preferred return is compounded over the full term, which is conservative because real capital is deployed and returned over time. Treat the outputs as directional — good for conversations and sanity checks, not for an LPA.
"2 and 20" is the classic private equity and venture capital fee structure: a 2% annual management fee on committed capital, plus 20% carried interest on the fund's profits. The 2% covers the firm's operating costs (salaries, diligence, overhead) while the fund is active; the 20% carry is the general partner's share of the upside, paid only after limited partners get their capital back — and, when there is a hurdle, a preferred return first.
Carried interest is the GP's percentage share of fund profits, not the whole fund. In a European (whole-fund) waterfall, distributions first return all committed capital to LPs, then pay a preferred return (the hurdle), then a GP catch-up, and finally split the remainder — typically 80% to LPs and 20% to the GP. So on a fund that returns 2.5x, carry is roughly 20% of the profit above invested capital, not 20% of everything distributed.
A hurdle rate (or preferred return) is the minimum annual return LPs must receive before the GP earns any carry — commonly 8%. Below the hurdle, all profits go to LPs. Above it, a catch-up provision lets the GP collect its full carry percentage on profits, then the standard split applies. Not every fund has a hurdle; many venture funds skip it, while buyout and credit funds usually include one.
A European (whole-fund) waterfall returns all LP capital and the preferred return across the entire fund before the GP takes any carry — LP-friendly. An American (deal-by-deal) waterfall lets the GP take carry on each profitable exit as it happens, subject to clawback. This calculator models the European whole-fund case; a deal-by-deal structure would pay the GP carry earlier and change the timing, though not necessarily the total.
Because LPs will ask, and because the numbers drive the raise. Modeling fees and carry shows how much of the economics actually reach the GP at different fund sizes and return levels, which informs how big a fund needs to be to sustain the team, and how terms (fee, carry, hurdle) affect the LP pitch. It is a core part of the fundraising conversation, especially for Fund I and II managers negotiating with anchor LPs.
Once the economics work, the raise is a sourcing problem. LPbacked helps you build a targeted list of limited partners — family offices, funds of funds, endowments and more — and reach the right decision-makers.
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