Distribution Waterfall Delta Calculator

Waterfall structures dramatically alter GP promote across IRR scenarios.

Investor capital

Pref rate %

Hold years

Exit multiple

Catchup %

Promote LP %

GP promote

$21,920,158

LP distribution

$88,079,842

Total exit proceeds

$110,000,000

How the math works

Pref = capital × (1+rate)^years. After pref split: GP catchup + promote share.

$50M × 2.2 = $110M exit − $73.5M pref return = $36.5M above pref. $18.25M catchup + $3.65M promote = $21.9M GP.

How to Use

Enter investor capital.
Enter pref rate %.
Enter hold years.
Enter exit multiple.
Enter catchup %.
Enter promote split %.
Read GP and LP allocation.

Frequently Asked Questions

How does a standard waterfall work?

Tier 1: LPs receive capital return + pref (typically 8% IRR). Tier 2: GP catchup (GP receives back to establish promote split — typically 50/50 until 80/20 is achieved). Tier 3: promote split (typically 80/20 LP/GP, sometimes 70/30). Higher IRR = higher promote share of total distribution. Modeling: at 10% IRR, GP gets ~15% of distributions. At 20%+ IRR, GP gets 25-35%.

What's a 'GP catchup'?

After LPs receive pref return, but before 80/20 promote split, GP receives a catchup payment to make-up. Standard structure: GP receives 50% or 100% of distributions until GP has received 20% of total distributions received by LPs (bringing them to 80/20 going forward). This rewards GPs who deliver above-pref returns with catch-up. Alternatively, hard-hurdle (no catchup) is more LP-friendly but rare in modern GP-LP structures.

American vs European waterfall?

American (deal-by-deal): waterfall applies to each investment individually — GP keeps promote as each deal exits. LP-unfriendly if some deals lose money. European (whole-fund): waterfall applies across entire fund — GP only gets promote after entire fund returns pref. More LP-friendly; common in institutional funds. Hybrid waterfalls exist. Most private real estate: American. Most infrastructure and opportunistic: European.

How do waterfalls affect GP behavior?

Weak promote (high pref, low catchup) = GP focus on risk avoidance. Strong promote (low pref, high catchup) = GP focus on upside. Different structures attract different GP skill sets. Fiscal-year crystallization (European) discourages mid-cycle distributions. Back-end promote (American) can encourage overleveraging. LPs scrutinize waterfall structure carefully because it quietly shapes 5-7 years of GP decisions.