Who gets what: the distribution waterfall, tier by tier
Enter contributed capital, proceeds and the LPA terms. See exactly how much flows to LPs and to the GP at each tier, whether the hurdle is cleared, how much carry the catch-up delivers, and how carry scales as proceeds grow.
- Full catch-up completes: the GP receives 20% of total LP profit.
Tier by tier
Each tier is filled in order. The GP commitment receives its pro rata share of proceeds and pays no carry.
| Tier | To LPs | GP carry | GP commitment | Total |
|---|---|---|---|---|
| Return of capital | $108M | $0 | $2.04M | $110.04M |
| Preferred return (8.0%) | $50.69M | $0 | $957.81K | $51.65M |
| GP catch-up (100%) | $0 | $12.67M | $0 | $12.67M |
| Residual split (80/20) | $19.95M | $4.99M | $710.57K | $25.64M |
| Total | $178.63M | $17.66M | $3.71M | $200M |
Where the proceeds go
Carry vs proceeds
Proceeds as a multiple of total contributed capital (LP capital, fees and GP commitment).
| Proceeds | Amount | GP carry | Effective carry | LP net MOIC |
|---|---|---|---|---|
| 1.00x | $110.04M | $0 | — | 1.00x |
| 1.25x | $137.55M | $0 | — | 1.25x |
| 1.50x | $165.06M | $3.31M | 6.1% | 1.47x |
| 1.75x | $192.57M | $16.2M | 20.0% | 1.60x |
| 2.00x | $220.08M | $21.6M | 20.0% | 1.80x |
| 2.25x | $247.59M | $27M | 20.0% | 2.00x |
| 2.50x | $275.1M | $32.4M | 20.0% | 2.20x |
| 2.75x | $302.61M | $37.8M | 20.0% | 2.40x |
| 3.00x | $330.12M | $43.2M | 20.0% | 2.60x |
Acquifolio computes distributions from each fund’s recorded calls and distributions, reconciles them to the cent and releases notices to the LP portal.
A single-period simplification: the hurdle accrues on all LP contributions for the full holding period and ignores the timing of individual calls and distributions. Your LPA governs the actual waterfall. Not investment, tax or legal advice. Everything runs in your browser and nothing you enter is stored or sent.
How it works
Proceeds are first split pro rata between LP capital (plus any management fees returned with it) and the GP commitment. The GP commitment gets its own capital and preferred return back, keeps its residual, and pays no carry. The LP share runs through four tiers in order:
- Return of capital: 100% to LPs until contributions (and fees, if included) are repaid.
- Preferred return: 100% to LPs until they receive the hurdle:
capital × ((1 + pref)^years − 1)compounding, orcapital × pref × yearssimple. - GP catch-up: the catch-up share
cgoes to the GP until it holds the carry ratekof all profit paid so far. The tier size isk × hurdle ÷ (c − k), so a 100% catch-up with 20% carry is a quarter of the hurdle. - Residual split: everything left is split
(1 − k) / k, typically 80/20.
LP net MOIC is LP distributions ÷ LP contributions; net IRR is approximated as MOIC^(1/years) − 1. Effective carry is GP carry ÷ LP profit before carry.
Questions
What is the difference between a European and an American waterfall?+
A European (whole-fund) waterfall returns all contributed capital and the preferred return across the fund before the GP takes any carry. An American (deal-by-deal) waterfall pays carry as each deal is realized, once that deal's capital, allocated fees and hurdle are returned. The American model gets carry to the GP earlier, so LPAs pair it with escrows and a clawback. This tool models one deal at a time in American mode.
How does the GP catch-up work?+
After LPs receive their preferred return, the catch-up tier sends most or all distributions to the GP until the GP has received its carry percentage of total profits. With a 100% catch-up and 20% carry, the GP ends with exactly 20% of profit once the tier is complete. With no catch-up, the GP only shares in profits above the hurdle, so effective carry is below the headline rate.
Why is effective carry lower than 20%?+
Either proceeds ran out inside the catch-up tier (a partial catch-up), the catch-up is below 100% and has not completed, or there is no catch-up at all. In each case the GP receives less than the headline carry rate of total profit. Once proceeds are well above the hurdle with a full catch-up, effective carry converges on the headline rate.
Should management fees be returned before the preferred return?+
Most institutional LPAs return contributed capital including management fees and fund expenses before the hurdle, so LPs earn their pref on everything they paid in. Toggle fees on to model that; turn it off to see the waterfall on invested capital only.
Does the preferred return compound?+
Typically yes: an 8% pref compounds annually on unreturned capital. Some LPAs use a simple (non-compounding) pref. This tool applies the hurdle to all contributions for the full period you enter, which is a simplification of a dated, call-by-call calculation.
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