Glossary · Fund economics
Waterfall
The contractual order in which proceeds are distributed between LPs and GP.
Why it matters
Same headline carry, very different LP cash flows depending on the waterfall.
Related
- Carried interest (carry)
The GP's share of profits above a hurdle. Typically around 20%.
- Hurdle / preferred return
The minimum LP return — often around 8% — that must be paid before the GP earns carry.
- Catch-up
A clause that lets the GP catch up to its full carry share once the hurdle has been paid to LPs.
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