Preferred Return & GP Catch-Up

Investment Thesis

European Waterfall: LP-First Distribution Mechanics

Fund IV employs a whole-fund European waterfall — the most LP-protective structure available. GP carry is deferred until all called capital is returned and the 8% compounding preferred return is fully satisfied across the entire fund.

Implication 1

No carry leakage on early exits — GP economics are aligned with total fund performance, not individual deal outcomes.

Implication 2

100% GP catch-up tranche ensures GP reaches 20% of total profits before reverting to standard 20/80 split.

Hurdle Rate

8.0%

Compounding preferred return

Capital Returned

37%37%

$715M of $1925M

Catch-Up Split

100 / 0

GP / LP until parity

Carry Split

20 / 80

Post catch-up

Progress Toward Carried Interest

Step 1: Return of Capital$715M / $1925M (37%)

Remaining: $1210M to return before preferred return begins

Step 2: 8% Preferred Return (Hurdle)Not yet started

Est. preferred return owed: ~$462M (8% compound on called capital over fund life)

Step 3: GP Catch-Up (100/0)Pending

GP receives 100% until GP has 20% of total profits. Est. $116M catch-up tranche.

Step 4: Carried Interest (20/80)Pending

All remaining distributions split 20% GP / 80% LP. Est. $1.1B in this tranche.

Hurdle Rate Mechanics

European vs American structure

EUROPEAN WATERFALL

GP does not receive ANY carry until ALL called capital is returned AND the 8% preferred return is achieved across the ENTIRE fund. This protects LPs from early carry on winners while losers remain unrealized.

Fund IV uses this structure

AMERICAN WATERFALL (Not Used)

GP receives carry deal-by-deal as each investment is realized. More GP-friendly but creates clawback risk if early exits perform well but later exits underperform.

Higher clawback risk for LPs