Fund Structure
GP Catch-Up
A waterfall mechanism that accelerates distributions to the GP after LPs receive their preferred return, until the agreed profit split is reached.
A 100% catch-up means that after LPs receive their preferred return (typically 8%), 100% of subsequent distributions go to the GP until the GP has received its full 20% of cumulative profits. After that, distributions revert to the 80/20 split.
Less GP-friendly variants use 50% or 80% catch-up rates, which materially reduce GP economics in modestly-performing funds. The catch-up is one of the most negotiated terms in the LPA, and its impact only becomes visible at funds that clear the hurdle by a narrow margin.