About this tool
A distribution waterfall sets the order in which cash from a fund is paid out between limited partners (LPs) and the general partner (GP). Most private equity and venture funds follow four tiers: return of capital, a preferred return (hurdle) to LPs, a GP catch-up, and then a carried-interest split of the remaining profit.
This calculator models a European (whole-fund) waterfall with date-based preferred return accrual, multiple LP groups, GP co-investment, and full catch-up — and shows the resulting LP and GP economics, IRR curves, Bear/Base/Bull scenarios and a GP clawback check.
How to use it
- Enter each LP group's committed capital and the GP co-investment.
- Set total distributions (proceeds) and the waterfall terms — preferred return, carry, catch-up rate and accrual basis.
- Set the investment and distribution dates so the preferred return accrues over the real holding period.
- Read the tiered breakdown, LP/GP split, IRR and clawback exposure — and use "Copy share link" to send the exact scenario.
Frequently asked questions
What is a distribution waterfall?
A distribution waterfall is the contractual order in which a fund's proceeds are split between LPs and the GP. The standard tiers are return of capital, preferred return, GP catch-up, then a carried-interest split (commonly 80/20).
What is the GP catch-up?
After LPs receive their preferred return, the catch-up lets the GP take a larger share (often 100%) of the next distributions until the GP has earned its full carry percentage on total profits above the return of capital — restoring the agreed profit split.
What is the difference between a preferred return and a hurdle rate?
They are usually the same thing: a minimum annual return (e.g. 8%) that LPs must receive before the GP earns carried interest. It can accrue on a simple or compounded basis over the holding period.
How is carried interest calculated?
Carried interest is the GP's share (commonly 20%) of profits above the return of capital and preferred return. With a full catch-up, the GP ultimately receives its carry percentage of all profit above invested capital.