The distribution waterfall is the order, fixed in the limited partnership agreement, in which a fund's cash proceeds are paid out: first returning limited partners' capital and costs, then a preferred return, then a GP catch-up tranche, then the residual profit split as carried interest between the limited partners and the general partner.
Two structures do the same job differently. A whole-fund ("European") waterfall tests the GP's carry entitlement against the fund's cumulative results before any carry is paid, so a loss on one deal is netted against a gain on another before the GP sees a dollar of profit share. A deal-by-deal ("American") waterfall instead lets the GP take carry as each investment is realized, ahead of confirming how the fund performs overall — faster for the GP, but it creates the risk that early winners pay out carry a later loser then makes too large in hindsight. That risk is exactly what a clawback provision exists to correct.
The waterfall is one of the most heavily negotiated sections of the LPA, and the CVCA's ILPA-based model limited partnership agreement is the reference document most Canadian GPs and LPs start that negotiation from — which is why the same tier structure recurs across otherwise unrelated funds even though the percentages inside it are set fund by fund.
Maple Ridge Capital Fund II, LP realizes $50,000,000 on an exit. Its own LPA sets the waterfall as: (1) return the $30,000,000 of called capital tied to that investment; (2) pay limited partners an 8% preferred return, $2,400,000, before any carry is tested; (3) route the next $600,000 entirely to the GP as a catch-up, which brings its cumulative share to exactly 20% of the $3,000,000 distributed as profit so far; (4) split the remaining $17,000,000 80% to limited partners ($13,600,000) and 20% to the GP ($3,400,000). Across the whole $20,000,000 of profit on this exit, the GP ends up with $4,000,000 — 20% — which is the check that confirms the waterfall's tiers were built correctly. These percentages are this fund's own negotiated terms; every Canadian LPA sets its own, and no external source publishes a standard rate.
See also: GP catch-up · Clawback provision · Limited partnership agreement.
A 30-minute call is enough to tell you whether AI pays for itself here.
Nobody publishes Canadian transaction data, so every valuation in this country quotes an American benchmark. We are building the Canadian one — multiples, asking-to-sale spreads and days on market, by sector and by city. Leave an email and you will see it first.
No pitch, no listings. One email when the first report lands.
