European Waterfall

Summary

One method for calculation of the General Partner (Private Funds) Carried Interest based on cumulative Portfolio Company realization. This is in opposition to an American Waterfall, under which the General Partner’s carry is calculated on a portfolio-by-portfolio company basis. For example, under the American system, if a portfolio company is realized prior to an investor being paid back its aggregate commitments to date, the General Partner could still receive its carry with respect to such realization. However, under the European system, the General Partner could only be allocated with respect to such particular realization if the investor had received a return of its total called commitment to date.