Private Equity Waterfall Distribution (Euro vs US).

## The Private Equity Waterfall

A distribution waterfall is the method by which capital is distributed to the underlying investors in a Private Equity or Venture Capital fund. It aligns the incentives of the General Partners (fund managers) with the Limited Partners (investors).

### FAQ

**Q: What is a European Waterfall?**
A: A European (or whole-fund) waterfall dictates that LPs must receive 100% of their *entire* contributed capital back, plus their preferred return hurdle, before the GP sees a single dime of carried interest. It is highly protective of LPs.

**Q: What is the GP Catch-up?**
A: Once LPs hit their preferred return (e.g., 8%), the GP enters a 'catch-up' phase where they receive 100% of the next distributions until their total take equals their carry rate (e.g., 20%) of all profits distributed so far.