Carefully Calculating the Waterfall

Part of the Gen II Fund Services thought-leadership series, Unlocking the Power of Private Equity Data.

Private equity fund economics are complicated – just ask the people whose job it is to calculate who gets paid how much and when. The distribution waterfall determines how profits are shared among GPs and LPs, and the formula behind this waterfall varies among funds and sometimes among investors within the same fund. This sometimes leads to errors, which, if left undetected, can cause enormous headaches late in the fund’s life. This report includes a summary of Privcap’s conversations with several fund operations experts from Cambridge Associates and Gen II, to learn top tips for accuracy in waterfall calculation.