Fund Structure
Distribution Waterfall
The contractual sequence by which fund proceeds are split between LPs and the GP.
The two dominant structures are American (deal-by-deal) and European (whole-fund) waterfalls. European waterfalls require LPs to be made whole on capital and preferred return before the GP receives carry; American waterfalls allow earlier carry.
Clawbacks, GP catch-ups, and tiered carry rates make the waterfall one of the most economically consequential clauses in the LPA.