Fund Structure
Clawback
A contractual obligation requiring the GP to return previously distributed carried interest if final fund performance falls short of the agreed split.
Clawbacks protect LPs in deal-by-deal (American) waterfalls, where the GP can collect carry on early winners before later losers are realized. At fund wind-down, the calculation is rerun across all deals, and any over-distribution to the GP must be returned.
The enforceability question is what matters. Look for: joint-and-several liability across the GP partners, escrow or holdback mechanics, after-tax versus gross-of-tax calculation, and whether the GP entity has the assets to actually pay. A clawback that exists only on paper protects no one.