How Private Equity Managers Get Paid — Carried Interest & Management Fees Explained

Welcome to CandiMentor.
In this session, we break down exactly how private equity fund managers get paid — including management fees, carried interest, hurdle rates, catch-up mechanics, waterfalls, clawbacks, fee offsets, and real journal entry logic.

Short sentences. Structured explanation. Classroom clarity.

⏱️ Timestamps
00:00 – Introduction
00:32 – What GP Compensation Really Is
01:01 – Three Components of GP Compensation
01:31 – Management Fees: Core Idea
01:56 – Fee Basis and Fee Rate
02:21 – Journal Entry for Management Fees
02:56 – What Carried Interest Means
03:19 – Conditions That Trigger Carry
03:41 – Preferred Return (Hurdle Rate)
04:06 – Waterfall: Top-Level Flow
04:40 – Step 1: Return of Capital
05:02 – Step 2: Preferred Return Accrual
05:31 – Step 3: GP Catch-Up Mechanics
06:03 – Step 4: Residual Profit Split (80/20)
06:35 – American vs European Waterfall
07:10 – Catch-Up Structure Variations
07:34 – Clawback Mechanism Explained
08:00 – Carry Accrual During Fund Life
08:31 – GP Commitment (Skin in the Game)
08:58 – Fee Offset Arrangements
09:19 – Tax & Legal Structuring Implications
09:48 – Governance, LPAC & Audit Oversight
10:12 – Full Waterfall Numerical Example
11:14 – Example Journal Entries for Carry
11:35 – Red Flags in GP Compensation
12:02 – Closing Summary
12:31 – Final Takeaway: How Incentives Shape Performance

What You’ll Learn

How PE managers earn fees and carry

How management fees flow through fund vs GP books

Hurdle rates, catch-up, waterfalls, and clawbacks
Detailed journal entry logic
How carry accrues and how it gets paid
American vs European structures
Tax implications and governance
How incentives shape PE behavior
This is the cleanest, most beginner-friendly breakdown of PE compensation.
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