Fund Waterfall Calculator
Model LP and GP distributions with hurdle rates, catch-up provisions, and carried interest
94% of total
6% of total
Multiple on invested capital
97% ROI
| Tier | LP ($M) | GP ($M) |
|---|---|---|
| 1. Return of Capital | $100.0 | $0.0 |
| 2. Return of Fees | $20.0 | $0.0 |
| 3. Preferred Return (8%) | $115.9 | $0.0 |
| 4. GP Catch-up (100%) | $0.0 | $14.1 |
| 5. Remaining Split | $0.0 | $0.0 |
| Total Distributions | $235.9 | $14.1 |
A distribution waterfall defines the order and allocation of profits between Limited Partners (LPs) and General Partners (GPs) in a private equity fund. The typical structure includes: (1) Return of LP capital, (2) Preferred return to LPs (hurdle rate), (3) GP catch-up, and (4) Remaining profits split according to carried interest terms. This structure ensures LPs receive their investment back plus a minimum return before GPs participate in profits.
Formula:
Tier 1: Return of Capital → Tier 2: Hurdle Return → Tier 3: GP Catch-up → Tier 4: Carry SplitEach tier must be fully satisfied before moving to the next. The catch-up typically gives GPs 100% of profits until they reach their carried interest percentage.
- 1
Enter total fund capital raised
- 2
Input realized proceeds from investments
- 3
Set the hurdle rate (preferred return, typically 8%)
- 4
Choose carried interest percentage (typically 20%)
- 5
Set catch-up percentage (typically 100%)
- 6
Select waterfall type (European vs American)
- 7
View the distribution breakdown by tier
- The waterfall structure defines how value is shared between LPs and GPs
- European waterfalls are more LP-friendly than American (deal-by-deal) waterfalls
- Understanding waterfalls is essential for fund formation and LP negotiations
- The hurdle rate protects LPs from paying carry on mediocre returns
- Waterfall analysis shows at what return levels GPs begin earning significant carry
- Modeling fund economics during fundraising
- Negotiating LP terms and carry structure
- Projecting GP compensation at different return levels
- Comparing European vs American waterfall structures
- Understanding when GPs start earning carry
- Preparing investor presentations and term sheets
- •European waterfalls can significantly reduce GP carry in moderate return scenarios
- •Some funds use a blended waterfall - European with American elements
- •The hurdle calculation may be simple (8% flat) or compounded annually
- •Clawback provisions require GPs to return excess carry if later investments underperform
Have questions about using this calculator? Check out our financial guides or contact us for help.
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