Golden waterfall pouring coins into four distinct tiers: ROC, Preferred Return, Catch-up Tranche, and Carried Interest. Illustrating capital distributions in private equity and hedge funds.

Distribution Waterfalls in Private Equity and Hedge Funds: Understanding the Orderly Allocation of Gains

Business Finance

Introduction to Distribution Waterfalls The world of private equity and hedge funds involves intricate structures that govern the allocation of returns between various stakeholders. One such structure is a distribution waterfall, which determines the order in which investment gains are distributed among investors. This mechanism is particularly relevant when underlying

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Carried Interest: Understanding the Controversial Performance Fee for Private Equity, Venture Capital, and Hedge Fund Managers

Business Strategy

What is Carried Interest? Carried interest refers to a share of profits that general partners of private equity, venture capital, and hedge funds receive based on their role in managing these investment vehicles rather than from an initial capital contribution. This performance fee rewards the general partner’s efforts by aligning

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