Carried interest or carry, in finance, specifically in alternative investments (i.e., private equity and hedge funds), is a share of the profits of an investment or investment fund that is paid to the investment manager in excess of the amount that the manager contributes to the partnership. As a practical matter, it is a form of performance fee that rewards the manager for enhancing performance.

In private equity, in order to receive carried interest, the manager must first return all capital contributed by the investors, and, in certain cases, the fund must also return a previously agreed-upon rate of return (the "hurdle rate" or "preferred return") to investors. Private equity funds only distribute carried interest to the manager upon successfully exiting an investment, which may take years. The customary hurdle rate in private equity is 7–8% per annum.

In a hedge fund environment, carried interest is usually referred to as a "performance fee". Hedge funds, because they invest in liquid investments, often are able to pay carried interest annually, if the fund has generated a profit for its investors.

The manager's carried-interest allocation will vary depending upon the type of investment fund and the demand for the fund from investors. In private equity, the standard carried-interest allocation historically has been 20% for funds making buyout and venture investments. Carried-interest rates – performance fees – among hedge funds have historically also centered around 20%, but have had greater variability than those of private equity funds. In extreme cases performance fees reach as high as 50% of a fund's profits, although usually it is between 15% and 20%.