Vested points times a value per point. The carry plan decides the vesting step, the leaver category and which value applies, and the range is wide.
A departing partner's vested carried interest is their carry points multiplied by the vested percentage on the departure date, applied either to the carry the fund eventually pays or to the carry accrued on the day they leave, depending on what the carry plan says. An illustrative partner holding 10 of 100 points leaves at month 42 of a five-year annual vesting schedule, keeps 6.0 points, and walks away with 4.80 million if the points ride to the end of an 80 million carry pool, or 1.80 million if they are frozen at the departure-date accrual.
Worked in full in The Private Equity Fund Controller Playbook by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
For the fund controller, a departure is not a legal event that happens elsewhere. It changes the carry allocation at the next quarter end, it creates forfeited points that someone has to hold, and it often triggers a dispute that turns on a calculation the controller produced. Getting it right means reading four terms in the carry plan: the vesting schedule, whether vesting is annual or monthly, the leaver categories, and what happens to forfeited points.
| Input | Value |
|---|---|
| Fund commitments, US$ millions | 500.0 |
| Carry rate, with full catch-up | 20% |
| Carry pool | 100 points |
| Departing partner's points | 10 |
| Vesting: straight line over 60 months from first close | 20% a year |
| Departure, months after first close | 42 |
| Carry accrued at departure (hypothetical liquidation), US$ millions | 30.0 |
| Projected carry at final realisation (20% of 400.0 of profit) | 80.0 |
| Points held by another partner, for the reallocation | 15 |
1. Vested points. Annual vesting counts completed years: 10 × INT(42 ÷ 12) ÷ 5 = 10 × 3 ÷ 5 = 6.0 points. Monthly vesting counts months: 10 × 42 ÷ 60 = 7.0 points.
In Excel: =Points*MIN(INT(Months/12),5)/5 for annual, =Points*MIN(Months,60)/60 for monthly.
2. Value per point. At departure: 30.0 ÷ 100 = 0.30 million. At final realisation: 80.0 ÷ 100 = 0.80 million.
3. Leaver's entitlement. Good leaver, points ride: 6.0 × 0.80 = 4.80. Good leaver, value frozen at departure: 6.0 × 0.30 = 1.80. Bad leaver, all points forfeited: 0.
4. Forfeited points. 10 − 6.0 = 4.0 points, worth 3.20 at final realisation.
| Plan terms | Points kept | Value, points ride (US$m) | Value, frozen at departure | Points forfeited |
|---|---|---|---|---|
| Good leaver, annual vesting | 6.0 | 4.80 | 1.80 | 4.0 |
| Good leaver, monthly vesting | 7.0 | 5.60 | 2.10 | 3.0 |
| Bad leaver | 0 | 0 | 0 | 10 |
The same departure produces anything from nil to 5.60 million. Two drafting choices dominate. Monthly against annual vesting is worth 0.80 million here, because a partner who leaves six months into a vesting year either keeps that half-year or loses it. Riding against freezing is worth 3.00 million, because the fund is still early: most of the eventual carry has not been earned at month 42. Freezing turns the leaver into a creditor for a fixed amount; riding keeps them exposed to the fund's outcome, upside and downside.
Forfeited points do not disappear. Plans typically either hold them for future hires or reallocate them to the remaining holders pro rata. Reallocated pro rata over the other 90 points, the 4.0 forfeited points add 0.0444 of a point to each remaining point. A partner with 15 points moves to 15.667, worth an extra 0.53 million at final realisation.
| Quarter-end carry allocation at departure | US$m |
|---|---|
| Departing partner, 6.0 vested points × 0.30 | 1.80 |
| Unvested 4.0 points × 0.30, to reallocate or hold | 1.20 |
| Partner with 15 points, before reallocation | 4.50 |
| Same partner after pro rata reallocation | 4.70 |
The fund's total accrued carry of 30.0 does not change: a departure moves carry between individuals inside the general partner, not between the GP and the LPs. The fund-level accrual is worked in how to calculate accrued carried interest at quarter end; the departure only changes the sub-ledger beneath it.
| Departure month | Vested, annual | Vested, monthly | Value, annual (riding) | Value, monthly (riding) |
|---|---|---|---|---|
| 18 | 2.0 | 3.0 | 1.60 | 2.40 |
| 30 | 4.0 | 5.0 | 3.20 | 4.00 |
| 42 | 6.0 | 7.0 | 4.80 | 5.60 |
| 54 | 8.0 | 9.0 | 6.40 | 7.20 |
| Final carry pool (US$m) | Fund profit | 6.0 points riding | Frozen at departure | Riding minus frozen |
|---|---|---|---|---|
| 20 | 100 | 1.20 | 1.80 | −0.60 |
| 40 | 200 | 2.40 | 1.80 | 0.60 |
| 80 | 400 | 4.80 | 1.80 | 3.00 |
| 120 | 600 | 7.20 | 1.80 | 5.40 |
A frozen entitlement is not automatically the leaver's bad deal. If the fund disappoints and the final pool is only 20 million, the frozen 1.80 beats the riding 1.20. If the frozen amount is paid only when carry is actually distributed, the controller also needs to track whether the pool can pay it at all.
The usual error is to apply the vested percentage to the accrued carry on the departure date and fix that as the leaver's entitlement when the plan says the points ride. At departure both readings give 1.80, so nothing looks wrong. But the leaver holds 6.0 points of whatever the pool becomes, 4.80 on the projection, and if the sub-ledger caps them at 1.80, every later quarter credits their share of the growth in carry to the remaining holders. The second error is forgetting clawback: a leaver whose points ride also carries their share of any GP giveback, which the plan needs to let the GP recover from someone who no longer works there. How the clawback itself is sized is covered in how the GP clawback is calculated at the end of a fund.
Controller's checklist on a departure: departure date and leaver category confirmed in writing, vested points recalculated under the plan's rounding, forfeited points booked to the named recipient or an unallocated line, the leaver's share of any carry already distributed and of any clawback reserve identified.
Vested points times a value per point is the whole calculation; the plan decides which value. Here the answer ranges from 1.80 to 5.60 million for one person on one date, so the controller should show all the plan-consistent variants before anyone signs a separation agreement. The book's waterfall, which produces the carry these points share, is in the free workbook for this book.
Annual vesting counts only completed years; monthly vesting counts months. A partner with 10 points leaving at month 42 of a 60-month schedule keeps 6.0 points under annual vesting and 7.0 under monthly vesting. On an 80 million carry pool split into 100 points, that one point is worth 0.80 million.
The carry plan decides: they are held for future hires or reallocated to remaining holders, usually pro rata. In the illustrative case 4.0 forfeited points spread over the remaining 90 add 0.0444 of a point to each, so a partner with 15 points moves to 15.667, worth 0.53 million more at final realisation.
Only if the plan freezes it. Many plans let vested points ride to final realisation instead. In the illustrative fund the 6.0 vested points are worth 1.80 million at the departure-date accrual and 4.80 million if the final pool reaches 80 million; if the pool ends at only 20 million, riding is worth 1.20 million, less than the frozen amount.
This article is one calculation from The Private Equity Fund Controller Playbook. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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