A Clawback means the Limited Partner (LP) requires the General Partner (GP) to return capital in excess of the performance fees that the GP deserves

A GP collects more performance fees than is deserved, when

  • The performance fee is collected on a deal by deal basis, i.e. American Waterfall
  • The private equity fund succeeds on early exits but loses on later investments
  • the overall performance fees that the GP deserves is lower then ┬áthe performance fees that it has collected

Potential issues with the clawback, where individual GP may have

  • Left the firm
  • Spent the money
  • Gone bankrupt
  • Passed away

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