Free calculator · Fund Economics
GP/LP Distribution Waterfall
Runs sale proceeds through a return-of-capital, preferred-return, and promote waterfall, separating the GP’s co-investor return from its sponsor promote and optionally layering in a sponsor fee stack. Inputs include total equity, the GP co-investment, preferred return, promote rate, hold period, distributable proceeds, and the fee assumptions.
By Devon Coombs, CPA, MBA · Teaching Professor of Finance, Santa Clara University · Reviewed August 2026
From the author: Devon Coombs, CPA, MBA teaches finance at Santa Clara University and works with corporate teams on practical AI.
AI training for finance teams · Consulting · The 10 Laws of Finance
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GP/LP Distribution Waterfall
Deal terms
Your turn
Run the waterfall and report what the sponsor earns as promote and what the limited partners actually take home.
A partnership raised $10,000,000 of equity, of which the GP funded 10% ($1,000,000) alongside the LPs. The LP agreement pays a 8.0% simple preferred return on contributed capital, then splits the residual 80/20 in the LPs favor. After a 5-year hold the deal distributes $16,000,000.
The preferred return accrues on each partner capital, including the GP co-investment, so run the tiers in order: capital back, then pref, then the split.
The performance fee only, not the GP total distribution. Within 2% counts as correct.
LP distributions divided by LP capital. Two decimals is enough. Within 0.01× counts as correct.
Treat every distribution as arriving at exit, so it is the multiple compounded over 5 years. Within 0.25% counts as correct.
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Built by Devon Coombs, CPA, MBA, Teaching Professor of Finance at Santa Clara University.