What is carried interest?

It is the share of fund profits allocated to the GP after the agreement's distribution rules are met.

What is a preferred return?

It is a hurdle that generally gives LPs priority on profits before carry is paid.

What is a GP catch-up?

It is a distribution tier that can direct proceeds to the GP after the hurdle and before the residual split.

Is this a legal LPA model?

No. It is an educational illustration and cannot replace the governing partnership agreement.

What is the difference between deal-by-deal and whole-fund carry?

Deal-by-deal pays carry as individual exits happen, so GP economics arrive earlier and clawback risk rises. Whole-fund tests the hurdle across the entire portfolio first. This visualizer follows the whole-fund sequence.

What does a GP catch-up actually do?

After the preferred return is paid, the catch-up directs a defined share of proceeds to the GP until its cumulative carry equals the agreed percentage of profit distributed so far.

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Free fund economics visualizer

Carry Waterfall Visualizer

Trace distributions from return of capital through preferred return, catch-up, and residual carried interest.

Educational simplification only. Real LPAs, tax treatment, and distribution mechanics vary materially.

Invested capital ($M)

Exit proceeds ($M)

Hold period (years)

Preferred return (%)

Carry rate (%)

Catch-up rate (%)

LP distribution

$196.0M

GP distribution

$24.0M

LP MOIC

1.96x

GP profit share

20.0%

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Distribution waterfall

Proceeds allocated by tier. Real LPAs can differ materially.

Tier	To LP	To GP	Remaining
Return of capital (LP)	100	0	120
Preferred return (LP)	46.9	0	73.1
GP catch-up	0	11.7	61.3
Residual to LP	49.1	0	0
Residual carry to GP	0	12.3	0

Educational caveat

Real LPAs vary by preferred-return calculation, catch-up design, distribution basis, clawbacks, fees, and tax treatment. Use the governing documents and professional advice for real fund distributions.

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Worked example: 2.0x fund, 8% pref, 20% carry

One hundred of invested capital returning two hundred after five years, run through the sequence with a full catch-up. Figures are in millions.

Invested capital: 100
Exit proceeds: 200
Hold period: 5 years
Preferred return: 8% compounded
Carry: 20%
Catch-up: 100%

1
Return of capital
100 to LPs, 100 of profit remains
2
Preferred return
100 x (1.08^5 - 1) = 47 to LPs, 53 remains
3
GP catch-up
GP takes 12 until it holds 20% of profit distributed
4
Residual split
41 remaining split 80 / 20 = 33 LP, 8 GP
5
Totals
LP 180 (1.80x), GP 20, which is 20% of the 100 of profit

The pref does not reduce GP carry in a full catch-up structure, it only delays it. Set catch-up below 100% and the same 2.0x outcome leaves the GP short of a full 20% share.

Method

A private equity carry waterfall sets the order in which sale proceeds are distributed between limited partners and the general partner. This educational visualizer follows a simplified whole-fund American-style sequence: return capital to LPs, pay a preferred return, pay the GP catch-up, then split residual proceeds.

Enter invested capital, exit proceeds or MOIC, hold period, preferred return, carry rate, and catch-up rate. The calculator allocates each dollar of proceeds through the sequence and reports LP distributions, GP distributions, LP MOIC, and GP share of profit.

1. Return capital
Distribute invested capital to LPs first, subject to available proceeds.
2. Pay the preferred return
Allocate the accrued hurdle to LPs before carry.
3. Apply GP catch-up
Allocate the defined catch-up portion to the GP.
4. Split residual proceeds
Distribute the remaining proceeds according to the carry rate.

Carry economics are central to aligning a private equity manager with investors, but the details are highly negotiated. A preferred return gives LPs priority over profit before carry begins. A catch-up may then direct proceeds to the GP until the agreed carry sharing relationship is reached. Remaining value is split according to the carry rate. This visualizer uses a deliberately simple framework so the ordering is visible. Change the hold period or preferred return to see how much of a mid-MOIC outcome is still trapped in the hurdle before GP economics appear. Change catch-up to see how quickly the GP reaches a full carry share after the pref is met. Real limited partnership agreements vary in hurdle compounding, catch-up mechanics, deal-by-deal versus whole-fund calculations, escrow, clawbacks, fees, recycling, GP commitments, and tax treatment. An LPA controls in an actual fund, and legal or fund-administration review is required for any real distribution. Treat this page as an educational map of the sequence, not an LPA calculator.

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