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.
Interactive Tool
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.
Learn the concept
This calculator comes from the free Real Estate Finance course, where the concept is taught with readings, worked examples, and practice questions.
Built by Devon Coombs, CPA, MBA, Teaching Professor of Finance at Santa Clara University.