Carried interest – “carry” – is the piece of economics that turns a good real-estate investment job into genuine long-term wealth creation.
In London and across Europe, carry is now a core part of compensation for investment professionals at private equity real estate funds, value-add/opportunistic managers and, increasingly, private credit platforms. But it is often poorly understood, inconsistently structured and hard to compare.
This guide sets out how carried interest typically works for real estate investment professionals in Europe. We work with clients to structure carried-interest plans that are competitive in the current market and effective at securing and retaining top performers, while aligning incentives across the life of a fund.
What is carried interest?
Carried interest is a share of investment profits paid to the sponsor and its senior team, usually after:
- Investors have had their capital returned, and
- A minimum hurdle rate (often 6–8% IRR) has been achieved.
In classic European real-estate private equity structures, the fund earns a promote (for example 15–20% of profits above the hurdle). That promote is then split between:
- The management company / partners, and
- The carry pool shared with senior professionals down to VP/Associate level.
Carry is therefore long-term and performance based – unlike salary and annual bonus, which are paid regardless of whether a fund ultimately performs.
Where carry features in real-estate roles
In the London market, carry is now common in:
- Private equity real estate & opportunistic/value-add funds.
- Real assets multi-asset platforms with meaningful closed-end strategies.
- Private credit / real-estate debt funds, especially those running higher-margin, opportunistic or mezzanine strategies.
By contrast, it is less common – or materially smaller – in:
- Core/core+ open-ended funds.
- Developers and listed PropCos/REITs, where LTIPs and stock schemes are more typical.
- Traditional banks and insurance companies, where compensation is dominated by salary + cash bonus.
Carry is the main differentiator between private equity real estate, investment managers and lenders, with total cash often similar but long-term upside heavily skewed to PE and higher-risk strategies.
How carry is structured (London market norms)
While each platform is different, common features in European real-estate carry plans include:
Fund-level pool
- Carry is usually calculated at the fund level (a “European waterfall”), sometimes with an overlay of deal-by-deal carry for specific strategies.
Vesting
- Standard vesting is 4–5 years, often aligned to the investment period.
- Leavers typically keep vested carry but forfeit unvested amounts, subject to “good leaver / bad leaver” rules.
Participation by level
Based on Caravel’s work and live mandates, a typical per-fund economic outcome for a mid-sized successful London real-estate fund might look like this (assuming a fully realised fund and “in-the-money” carry):
- Associate – equivalent to £25k–£75k per year over the life of the fund (average c. £250k per fund)
- Vice President – £50k–£100k per year (average c. £375k per fund)
- Director – £75k–£150k per year (average c. £560k per fund)
- Managing Director / Partner – £100k–£250k+ per year (fund-level economics can be materially higher at top-quartile platforms)
These numbers are illustrative only, but show carry becoming financially meaningful from VP/Director level upwards, with partners holding the majority of the promote.
Co-investment
Many funds require senior staff to co-invest alongside LPs.
In our experience at Caravel, private debt funds are more likely than other private-markets strategies to grant carry without requiring co-investment, which is relevant for London real-estate credit platforms currently competing hard for talent.
Compensation Trends (Europe / London)
- Whilst base salaries across European real estate were broadly flat, carried interest and promote values are much lower due to lower valuations and slower exits.
- Median cash compensation growth of only ~1–2% across most functions, with carry taking the strain at senior levels: platform heads and MDs in acquisitions have seen repeated reductions in total comp when carry is marked to a weaker market.
- European executives have at times traded carry for higher fixed pay late in the cycle – a theme now returning as some professionals prioritise certainty over long-dated upside.
- Carry remains central to long-term wealth for real-estate investment professionals, but its perceived value is lower today than it was at the peak of 2021/22, particularly for office or legacy portfolios.
- Top performers in living, logistics and alternatives still see highly attractive carry outcomes; those in more challenged sectors are placing more emphasis on base + bonus.
How Caravel Can Help
Caravel operates exclusively at the intersection of real estate and finance. We see real carried-interest terms across:
- Pan-European value-add / opportunistic funds
- Core/core+ and open-ended managers
- Private credit / special situations and real-estate lending platforms
- Developers, operators and listed vehicles with LTIPs or shadow-carry
We are able to help clients structure packages that balance base, bonus and long-term upside in a way that aligns interests over the life of a fund.
Important note
This guide is informational only and focuses on broad market practice in London and wider Europe. Individual carried-interest plans vary widely by firm, strategy, sector and fund performance.
