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Private equity funds - economics, the waterfall, and the arithmetic of performance

Distribution waterfall calculator

Capital calls and realisation proceeds distributed through return of capital, preferred return, catch-up and carry, under a whole-fund (European) and a deal-by-deal (American) construction at the same time, with the clawback position at termination. Every input is encoded in the URL. All arithmetic runs in the browser; the page makes no network request.

Assumptions

All rates are inputs you set, labelled as assumptions. Nothing on this page is a market-terms survey, a measured figure, or a benchmark. A catch-up share at or below the carry rate never completes and behaves as a hard hurdle.

Cash-flow schedule

One row per period. Time is years from the fund's first closing and is used directly in the IRR; the default is annual year-end periods. Calls are total LP drawdowns including fees and expenses. Distributions are gross realisation proceeds before carry.

PeriodTime, yearsCapital callGross proceedsNAV at period end
11119.300.0105.0
22110.500.0215.0
33110.500.0355.0
4490.500.0515.0
5550.50110.0545.0
666.2030.0615.0
775.30310.0395.0
883.80225.0225.0
992.30180.072.0
10101.1080.00.0

Investments

Required for the deal-by-deal waterfall and for a cost-basis fee. Attributable capital grosses each cost up so the total equals contributed capital.

InvestmentCostAcquired, periodRealised, periodProceeds
A45.015110.0
B60.01630.0
C100.027310.0
D100.038225.0
E80.049180.0
F40.051080.0

The two waterfalls side by side

Results

Cumulative LP and GP proceeds

Tier by tier

Whole-fund (European) waterfall, period by period

Deal-by-deal (American) waterfall, investment by investment

Management fee schedule

Share this scenario

The tier structure

Each distribution is applied in order. A tier receives nothing until the tier above it is satisfied.

TierWho receives itHow muchExhausted when
1. Return of capitalLP, 100 percentmin(distribution, UC)Unreturned contributed capital UC reaches zero
2. Preferred returnLP, 100 percentmin(remaining, PA)Accrued unpaid preferred return PA reaches zero
3. GP catch-upGP, share c; LP, share 1 - cmin(remaining, G* - G paid)Cumulative GP carry equals k times cumulative profit distributed
4. Carry splitLP, 1 - k; GP, kall remainingNever - it runs to the end of the fund

The formulas

Notation. C is LP commitments. PIC is paid-in or contributed capital. I is invested capital at cost. D is cumulative distributions to LPs. NAV is the fair value of unrealised investments. UC is unreturned contributed capital and PA the accrued unpaid preferred return. h is the preferred return rate, k the carried interest rate, c the GP's share of distributions inside the catch-up band. P is cumulative profit distributed and Pref the cumulative preferred return paid. Aj is the capital attributable to investment j and Rj its realisation proceeds. t is time in years and n a holding period.

Preferred return accrual. In each period the preferred return accrues on unreturned contributed capital as it stood at the end of the previous period, before the current period's call: accrual_t = h * UC_(t-1), and PA_t = PA_(t-1) + accrual_t - pref paid in t. Unreturned capital rolls forward as UC_t = UC_(t-1) + call_t - return of capital_t.

The catch-up boundary. The catch-up ends when the GP's cumulative carry equals k times cumulative profit distributed. Because cumulative profit inside the band is Pref + G and the GP takes c * G of the band, the band size solves c * G = k * (Pref + G), so G* = k * Pref / (c - k) and the catch-up completes at cumulative profit Pref * c / (c - k). With c = 1 and k = 0.20 that is 0.25 * Pref of catch-up and 1.25 * Pref of profit. When c <= k the denominator is zero or negative, the band never closes, and the GP simply takes share c of everything above the preferred return - a hard hurdle.

Deal-by-deal attribution. Capital attributable to investment j is its cost grossed up so the total equals contributed capital: A_j = cost_j * PIC / sum(cost). The preferred return on it compounds over the holding period, q_j = A_j * ((1 + h)^n - 1), and profit is p_j = R_j - A_j. Carry on that realisation is zero while p_j <= q_j, then c * (p_j - q_j) until the catch-up completes at p*_j = q_j * c / (c - k), and k * p_j above it.

Clawback. At termination the GP's aggregate entitlement is recomputed as if the whole-fund waterfall had applied to all cash flows. Carry already received above that figure is owed back: clawback = max(0, sum of deal carry - whole-fund carry). The escrow that exactly covers it is clawback / total carry distributions, expressed as a share of carry.

Multiples. DPI = D / PIC, RVPI = NAV / PIC, TVPI = (D + NAV) / PIC, and TVPI = DPI + RVPI identically. Gross MOIC is gross proceeds divided by invested capital at cost, which is a different denominator from paid-in capital.

IRR. The IRR is the rate r solving 0 = sum over flows of amount / (1 + r)^t with t in years, solved numerically by bisection over r on the actual dated cash-flow vector. It is not derived from a multiple: the identity IRR = MOIC^(1/n) - 1 holds only for a single drawdown and a single distribution. Where the flow vector changes sign more than once the equation can have more than one solution, and where it never changes sign it has none; both cases are reported as such rather than as a number.

Management fee. The rate applies to commitments during the investment period and to the stated basis after the step-down. The cost basis of unrealised investments at the start of a period is the sum of the cost of investments acquired in an earlier period and not yet realised. The opening net asset value basis uses NAV at the end of the previous period.

URL parameters

ParameterMeaningDefault
commitmentLP commitments, in the same units as every other figure500
feerate1:years:rate2:base2, base2 being commit, cost or nav0.02:5:0.015:cost
hurdlePreferred return rate, decimal fraction. 0 for no hurdle0.08
carryCarried interest rate k, decimal fraction0.2
catchupGP share c inside the catch-up band. 1 is a full catch-up1
typewhole or deal - selects which waterfall is shown in detail first; both are always computedwhole
callsCapital calls by period, earliest first, comma separatedthe reference schedule
distsGross realisation proceeds by period, aligned to callsthe reference schedule
dealscost:acquired:realised:proceeds per investment, comma separatedthe six reference investments
navNet asset value at the end of each periodthe reference schedule
escrowShare of each carry distribution held in escrow0
timesOptional. Time in years for each period, if not annual year ends1,2,3,...

The reference fund, whole-fund:
https://pe-finance.wiki/calc/?commitment=500&hurdle=0.08&carry=0.2&catchup=1&type=whole&calls=119.3,110.5,110.5,90.5,50.5,6.2,5.3,3.8,2.3,1.1&dists=0,0,0,0,110,30,310,225,180,80

The same fund deal by deal, with a 30 percent escrow:
https://pe-finance.wiki/calc/?commitment=500&hurdle=0.08&carry=0.2&catchup=1&type=deal&escrow=0.3&calls=119.3,110.5,110.5,90.5,50.5,6.2,5.3,3.8,2.3,1.1&dists=0,0,0,0,110,30,310,225,180,80&deals=45:1:5:110,60:1:6:30,100:2:7:310,100:3:8:225,80:4:9:180,40:5:10:80

What this model leaves out

It ignores interim clawback tests, GP giveback caps and after-tax limits, the GP commitment and its own share of distributions, recycling and reinvestment provisions, fee offsets against carry, transaction and monitoring fees, expenses charged outside the fee, subsequent-closing interest and equalisation, side letters, excuse and exclusion rights, defaulting-partner mechanics, in-kind distributions, currency, withholding and blocker structures, and the timing conventions of any particular limited partnership agreement. Real waterfalls are governed by the partnership agreement, not by a formula.

Published and maintained by · [email protected]. About this reference · pe-finance.wiki · the wider network.

Reference information only. Not legal, tax, or investment advice. Fund documents vary materially between managers, vehicles and jurisdictions; the structures described here are common patterns rather than the terms of any particular fund, and every figure is derived from a single illustrative reference fund whose inputs are stated. Consult counsel.

Reviewed 2026-08-27. Text and data under CC BY 4.0. See also the PME and subscription-line calculator.