Waterfall Distribution Calculator
Model how fund proceeds flow through each tier of a European-style waterfall — from return of capital through profit split.
Investors
4 LPs · 1 GP
Total: $1,020,000
Fund Terms
Preferred Return Rate
GP Promote
LP gets 80%
Distribution
Hold period: 1 year
Waterfall Flow
Tier Breakdown
| Tier | Amount | % of Total | LP Share | GP Share | Status |
|---|---|---|---|---|---|
| Return of Capital | $1,020,000.00 | 85.0% | $1,000,000.00 | $20,000.00 | Complete |
| Preferred Return | $81,600.00 | 6.8% | $80,000.00 | $1,600.00 | Complete |
| GP Catch-Up | $20,400.00 | 1.7% | $0.00 | $20,400.00 | Complete |
| Profit Share | $78,000.00 | 6.5% | $62,400.00 | $15,600.00 | Complete |
| Total | $1,200,000.00 | 100% | $1,142,400.00 | $57,600.00 |
LP vs GP Summary
LP Summary
GP Summary
Per-Group Breakdown
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What Is a Waterfall Distribution?
A waterfall distribution is the method used by real estate funds and private equity partnerships to divide investment profits between limited partners (LPs) and the general partner (GP). The term “waterfall” comes from how cash flows sequentially through a series of tiers — each tier must be fully satisfied before proceeds spill into the next. This structure aligns GP incentives with investor returns: the GP earns their promote only after investors receive their capital back and a preferred return. For a deeper dive, see our guide on what waterfall distributions are and how they work.
How the Four Tiers Work
The European-style waterfall used in this calculator has four tiers. Tier 1 — Return of Capital returns each investor's original contribution before any profits are split. Tier 2 — Preferred Return pays investors a time-weighted preferred return (typically 6–10% annually) on their deployed capital. Tier 3 — GP Catch-Up gives the GP a disproportionate share of profits until the GP has received their target promote percentage of total profits. Tier 4 — Profit Split divides all remaining proceeds according to the LP/GP promote split (commonly 80/20).
Understanding Preferred Return
The preferred return (or “pref”) is the minimum annual return LPs receive before the GP earns any promote. It accrues on each capital contribution from the date it was funded through the distribution date. This calculator supports three day-count conventions — Actual/365, Actual/360, and 30/360 — which affect how many days of accrual are counted. A higher pref rate protects investors but raises the bar the GP must clear to earn their promote. Learn more in our preferred return explainer.
GP Catch-Up Explained
The catch-up tier ensures the GP receives their fair share of overall profits. After the preferred return is satisfied, 100% of the next dollars flow to the GP until the GP's total profit share equals their promote percentage of all profits distributed so far. For example, with a 20% promote and $80,000 in preferred return, the catch-up target is $20,000 — bringing the GP's share to 20% of the $100,000 total profit. Once the catch-up is met, remaining proceeds split 80/20. Some funds disable the catch-up, meaning the GP only earns their promote percentage on the profit split tier. Read more in our GP catch-up guide.