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Yes, the PE manager raises multiple funds. The PE managers staff are allocated carry in each fund. Over a 10 year period, senior staff at the PE manager would have carry across 3-5 funds depending on how fast they raise and invest each fund.
Completely agree with Franco, this is the core of how private equity functions. It also means that a firm which is deploying capital faster will be in a position to raise their next fund sooner … so deployment velocity becomes a key factor in compensation as well as carry allocation for any given fund.
Must be nice to have carry allocation across multiple funds.... Do most PE firms in North America utilize the American waterfall? Are there any firms or funds that use an European waterfall?
A lot of NA PE funds use the American waterfall...hence the term 'American' waterfall
Inspiring
I found the European waterfall to be incredibly common in North America. As a result, I’ve always wondered why they called it that.
And yes, carry across multiple funds is absolutely fantastic.
The term European and American waterfall are less useful now. It is more useful to use ‘Whole of Fund’ or ‘deal by deal’ waterfall. Most European and American PE funds now use Whole of Fund waterfall.
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