Waterfall outlines when a General Partner (GP) actually receives performance fees

  • European waterfall
  • American waterfall

A European waterfall is advantageous to the limited partner (LP)

  • All of the capital is returned to the LP as deals are exited
  • LP receives its original investment + a return equivalent to a hurdle rate before the GP receives any performance fees

An American waterfall is advantageous to the general partner (GP)

  • performance fees are collected on a deal by deal basis
  • More details in video #14

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