The GP catch-up is the tier of the distribution waterfall, coming right after limited partners receive their preferred return, in which the general partner receives a disproportionate share of proceeds until its cumulative carried interest reaches the full percentage the limited partnership agreement gives it of total profit.
The catch-up exists because a preferred return paid first would otherwise permanently shrink the GP's share of the earliest profit; the LPA's catch-up tier restores the GP to its full negotiated percentage measured from dollar one, not from the point the preferred return cleared. Two structures are common: a "full" or 100% catch-up routes the entire next tranche to the GP until the make-up is complete, while a "50/50" catch-up splits that tranche between GP and LPs, so the make-up takes longer to finish. Which structure a given fund uses, and where it sits relative to the carry split after it, is set out fund by fund in the LPA — commonly negotiated from the CVCA's ILPA-based model documents, not fixed by any outside convention.
Because the catch-up is what lets the GP reach its full carry percentage quickly, it is the tier a clawback provision most often ends up correcting: if a catch-up was paid on an early deal that turns out to be the fund's best performer, while a later deal in the same fund loses money, the GP's cumulative share can land above its entitled percentage once every investment is finally counted. That is also why anchor limited partners on the fund's advisory committee tend to negotiate the catch-up rate and the preferred return that precedes it together, as a single package, rather than treating either tier in isolation.
Continuing the distribution waterfall example: after Maple Ridge Capital Fund II, LP's $50,000,000 exit, limited partners have received their $30,000,000 of capital plus a $2,400,000 preferred return (8% of the $30,000,000). The next $600,000 of proceeds routes entirely to the GP under its 100% catch-up, bringing the GP's cumulative share to exactly 20% of the $3,000,000 distributed as profit so far ($600,000 ÷ $3,000,000). Had the LPA instead specified a 50/50 catch-up, reaching that same 20% make-up point would take a larger, $1,600,000 tranche split evenly between GP and limited partners ($800,000 each), rather than $600,000 taken entirely by the GP — the same destination, reached on a slower schedule that leaves limited partners with a larger share of the profit distributed along the way.
See also: Distribution waterfall · Clawback provision · Limited partner.
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