Calculator
Equity waterfall calculator
Model how distributions flow between investors and the sponsor through return of capital, preferred return, catch-up and carried interest. European whole-fund structure on a single pool of capital. Everything is calculated in your browser; nothing is uploaded or stored unless you choose to email yourself the result.
Written by CA Pranay Bhansali, Founder & Principal, Volaxi — Chartered Accountant (ICAI), former senior buy-side research analyst.
Last reviewed September 2026 · LinkedIn
This calculator handles the arithmetic of a standard structure. Hurdle compounding conventions, clawback, deal-by-deal versus whole-fund mechanics and tier ordering are negotiated positions that sit outside any tool.
Inputs
Enter values in any consistent currency unit. Percentages as numbers (8 for 8%).
The waterfall
- 1 · Return of capital
- 100,000
- 2 · Preferred return
- 46,933
- 3 · GP catch-up
- 11,733
- 4 · Residual split
- 51,334
LP total
180,653
1.90× on 95,000 contributed
GP total
29,347
5.87× on 5,000 contributed
GP carried interest
22,000
Indicative only. Actual waterfalls are governed by the fund documents — clawback, escrow and tier sequencing can move outcomes materially.
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How to read the tiers
Cash fills each tier completely before the next opens. Investors first recover their capital, then their preferred return on it. Only then does the sponsor participate meaningfully — through the catch-up, which brings the sponsor to its full carry percentage of profits, and then the residual split.
The two inputs that move outcomes most are the catch-up percentage and the hurdle. A 100% catch-up makes the headline carry rate real over total profits; anything lower leaves the sponsor short. The hurdle compounds, so on longer holds the preference absorbs a striking share of modest exits before carry begins.
For the full treatment — American versus European structures, clawback, and building the schedule in a model — see the equity waterfall model guide.
Frequently asked questions
What is an equity waterfall?
An equity waterfall is the schedule that defines how cash distributions are shared between investors (limited partners) and the sponsor (general partner). Cash flows through successive tiers — return of capital, preferred return, sponsor catch-up and the residual carried interest split — with each tier filled before the next begins.
What is a preferred return (hurdle)?
A preferred return is the minimum return investors must receive before the sponsor earns carried interest, typically 8% per annum compounding on contributed capital. It protects investors from paying performance fees on sub-hurdle performance.
What is a GP catch-up?
A catch-up provision pays the sponsor a disproportionate share — often 100% — of distributions immediately after the preferred return, until the sponsor has received its full carry percentage of all profits distributed so far. A 100% catch-up restores the headline 80/20 economics over total profits.
What is the difference between American and European waterfalls?
An American (deal-by-deal) waterfall pays carry on each realised investment, so the sponsor can earn carry early even if later deals lose money — usually tempered by clawback and escrow. A European (whole-fund) waterfall returns all contributed capital plus the preferred return on it before any carry is paid, which is more protective for investors. This calculator models a European whole-fund structure on a single pool of capital.
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