Fund Level IRR equity waterfall - split between LP and GP
Originally published: 06/04/2021 08:08
Last version published: 06/04/2021 15:44
Publication number: ELQ-16977-2
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Fund Level IRR equity waterfall - split between LP and GP

Basic model to demonstrate equity waterfall split between LP and GP

This model is a simple equity waterfall between investors (LP) and the fund manager (GP) and how the returns will flow based on parameters that are put in place. The GP and LP are both investors but only the GP is active and has a relatively small contribution to the fund, therefore there are incentives and rewards for the GP for being successful in gaining returns for the LPs. The waterfall between the LP and GPs are be short and simple or it can be very very long with multiple waterfalls.

In the example I have used it is quite simple with one GP promote, when investor target returns are met the GP promote kicks in and they get a target percentage of all further distributions until a cut off point, then there is a just a pro-rata distribution of all remaining profits. There are only 6 inputs and should allow you to get an understanding of how an equity waterfall works.

These contribution percentages and/or waterfall limits can be played with the determine the effect that each has for the different investors.

Note, this model is 100% free for your use, if you do end up using it for business purposes, please consider downloading it again through the paid option.

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Further information

to understand LP/GP equity waterfalls for funds

Ideal for: Understanding and playing around

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