Beyond the basic 2/20 headline, fund economics involve layered mechanics that determine what LPs actually keep. The management fee is typically charged on committed capital during the investment period, then on invested capital or net asset value thereafter. The carried interest is a share of profits, usually 20%, but its value depends heavily on the hurdle rate and catch-up provision.

Hurdle rate: Minimum return (often 8%) LPs receive before GP takes carry.
Catch-up: GP receives a disproportionate share of profits until it reaches its target carry percentage.
Waterfall: Deal-by-deal vs. whole-fund determines timing and risk of clawback.
Clawback: GP must return excess carry if later losses erase earlier gains.

Term	Typical Value	Impact on LP Net Return
Management Fee	2% of commitments	Reduces gross return by ~2% annually
Carried Interest	20% of profits	Reduces upside by 20% after hurdle
Hurdle Rate	8% preferred return	Protects LP base return
Catch-up	100% to GP	GP quickly reaches 20% of total profit