Fund accounting

Accrued carried interest

Also called accrued carry, carry accrual, unrealised carried interest, hypothetical liquidation carry.

Definition

Accrued carried interest is the amount of carry the general partner would be entitled to if the fund sold every investment at its current fair value and ran the proceeds through the distribution waterfall, recorded as an allocation from limited partners' capital accounts to the general partner's capital account rather than as a payment, and reversed if values fall.

Updated October 9, 2026Checked against our editorial standards

Example

LPs have contributed $40M and the fund's NAV is $70M with nothing yet distributed. The hypothetical liquidation returns $40M, clears the preferred return and the catch-up, and leaves the GP with 20% of the $30M profit, or $6M. The fund allocates $6M from the LPs' capital accounts to the GP's carry account, so the LPs' aggregate capital is $64M and their net multiple is 1.6x rather than 1.75x. If NAV falls to $55M the next quarter, accrued carry drops to $3M and $3M moves back to the LPs.

Confused with

Carried interest distributions. Cash actually paid to the GP through the waterfall on a realisation. Accrued carry is the paper version of the same entitlement and can go to zero without anyone writing a cheque.

Clawback. The clawback recovers carry that was paid out and later proved excessive. Accrued carry never needs clawing back, because it simply reverses.

In practice

Accrued carry is shown as its own line on the capital account statement, and the LP's NAV on that statement is after it. Auditors test the hypothetical liquidation model against the LPA waterfall. The most common error is accruing deal by deal when the LPA waterfall is whole-of-fund, which overstates the GP's capital in the early years.

Related terms

Carried interestCarried interest is the general partner's share of a fund's profits, typically 20%, paid through the distribution waterfall only after limited partners have received their contributed capital and, usually, a preferred return.
NAV (net asset value)NAV, net asset value, is the value of a fund's assets, with investments carried at fair value, less its liabilities at a reporting date, and equals the total of all partners' capital accounts.
Fair valueFair value is the price that would be received to sell an investment in an orderly transaction between market participants at the measurement date.
ClawbackClawback is a provision in the limited partnership agreement that obliges the general partner to return carried interest already distributed to it if, measured over the life of the fund, it has received more than its agreed share of net profit or limited partners have not received their capital and preferred return in full.