The Distribution Waterfall, LP vs GP

Runs fund proceeds through the four-tier distribution waterfall, return of capital, preferred return, GP catch-up, then the carry split. Inputs are committed capital, total returned, the preferred-return hurdle, and the carried interest rate.

Interactive Tool

Committed capital

Total returned

Preferred return (hurdle $)

Carried interest

LPs receive

$260M

capital + profit share

GP carry

$40M

20% of $200M profit

1 · Capital

$100M

to LPs

2 · Preferred

$20M

hurdle to LPs

3 · Catch-up

$5M

to GP

4 · Split

$175M

80 / 20

Capital returns first, then the preferred return, then the GP catch-up, then the 80/20 split. With a full catch-up the hurdle changes the timing of payments, not the final 20% split, a fund with no hurdle reaches the same totals directly.

Learn the concept

This calculator comes from the free Entrepreneurial Finance course, where the concept is taught with readings, worked examples, and practice questions.

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Built by Devon Coombs, CPA, MBA, Teaching Professor of Finance at Santa Clara University.