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Hi truelondoner, the silence is deafening, sorry about that.... Any of the threads below helpful?
More suggestions...
You're welcome.
Firstly these terms are less useful now as many US funds use a “European waterfall”.
Whole of fund (instead of European) and deal by deal (instead of American) is more descriptive now.
In a whole of fund waterfall, the typical structure is:
In a deal by deal waterfall the above occurs at a deal level. In practice that means GPs get paid carry for each deal.
Thanks for the clarity, but why there is a class called Hybrid?
Depends on the specific terms but hybrid can include something like end of fund true up to make sure the LP still received a realized return similar to a whole of fund waterfall.
Thanks for taking the time, it helps.
The "hybrid" part is really a combination of Euro and American. See (ii) of the Hybrid approach and it should make sense.
(i) = first prong of waterfall
(ii) = second prong of waterfall
European
- (i) GP has to return ALL contributions to LPs (so that's investment contributions and cost contributions (aka contributions that are used to pay expenses))
- (ii) pref
American
- (i) GP only has to return investment contributions made with respect to realized investments
- (ii) GP has to return expenses paid with respect to realized investments
Hybrid
- (i) GP only has to return investment contributions made with respect to realized investments
- (ii) GP has to return ALL expenses regardless of whether the expenses are in connection w/ realized investments or not
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