--- title: "GP Catch-Up | Altss Glossary" description: "A GP catch-up is the waterfall tier after the preferred return in which the general partner receives all or most distributions until its cumulative share…" canonical: "https://altss.com/glossary/catch-up" --- Glossary · Fund economics # GP Catch-Up Also called: catch-up provision A GP catch-up is the waterfall tier after the preferred return in which the general partner receives all or most distributions until its cumulative share equals its carry percentage of all profits distributed so far. Publisher: Altss LLCPublished 2026-01-06Content modified 2026-10-01 ALTSS-ECON-008 Once LPs have their capital and preferred return, the catch-up lets the GP reach the profit share its carry percentage promises. With 20% carry and a 100% catch-up, every dollar in this tier goes to the GP until the GP holds 20% of all profit, including the profit LPs received as their pref; after that, profits split 80/20. The catch-up therefore changes how much carry the GP earns, not only when: without it, the 20% would apply only to profit above the hurdle. ## Formula ### Size of the catch-up tranche ``` X = c × P ÷ (k − c); the GP receives k × X, which equals c × (P + X) ``` `X` total distributions in the catch-up tier (GP and LP shares combined) `P` preferred return already distributed to LPs `c` carry rate, e.g. 0.20 `k` GP share of each dollar in the catch-up tier: 1.0 for a full (100%) catch-up, 0.8 for an 80/20 catch-up Requires k > c. Some LPAs state the same tier as "100% to the GP until it has received an amount equal to 25% of the preferred return" (for 20% carry, 0.20 ÷ 0.80 = 25%). If distributions run out before X is reached, the catch-up is incomplete and the GP's share of profit is below c. Calculator ## Whole-fund waterfall calculator One contribution at the start and one distribution after the holding period. Tiers: return of capital, preferred return, GP catch-up, then the carry split. Set catch-up to 0 for no catch-up. Real LPAs add fees, expenses, multiple cash flows and clawback; this shows the mechanics only. Capital contributedTotal distributableYears heldPreferred return (%)Carried interest (%)GP catch-up share (%)Preferred return basisCompounded annuallySimple Waterfall allocation by tier | Tier | LPs | GP | | --- | --- | --- | | 1. Return of capital | 100 | 0 | | 2. Preferred return | 46.93 | 0 | | 3. Catch-up | 0 | 11.73 | | 4. Carried-interest split | 33.07 | 8.27 | | Total | 180 | 20 | GP share of total profit: 20.00% ## What the catch-up changes A catch-up changes totals. Compared with the same waterfall without one, it raises the GP's carry from c × (profit above the hurdle) to c × (all profit) once it is complete: 16.00 instead of 6.61 in the examples. Above the completion point, the preferred return only determines the order in which LPs and the GP are paid, not how total profit is shared. Below it, the GP's share of profit lies somewhere between zero and the full carry rate. ## Full and partial catch-ups A **full** or **100%** catch-up sends every dollar in the tier to the GP and completes fastest. A **partial** catch-up shares the tier, for example 80% to the GP and 20% to LPs, so LPs keep receiving cash while the GP catches up and more profit is needed to complete it. Completion points in the examples: profit of 58.67 for the full catch-up, 62.58 for the 80/20 catch-up. The label "80/20" is ambiguous in conversation: here it describes the split inside the catch-up tier, not the final 80/20 profit split. ## Where catch-ups appear Catch-ups are standard in [European (whole-fund)](https://altss.com/glossary/european-waterfall) private equity waterfalls with a [preferred return](https://altss.com/glossary/preferred-return). In [American (deal-by-deal)](https://altss.com/glossary/american-waterfall) waterfalls they apply deal by deal. Many real estate promote structures have no catch-up and instead raise the sponsor's share in tiers. A waterfall without a catch-up is said to have a hard hurdle (see [hurdle rate](https://altss.com/glossary/hurdle-rate)). ## What LPs check The GP share k in the tier; how the target is defined (c of all profit distributed, or a stated percentage of the pref); whether tax distributions to the GP count toward the catch-up; and how the catch-up interacts with the [clawback](https://altss.com/glossary/clawback) if later losses reduce cumulative profit after the catch-up has been paid. ## Worked examples ### Illustrative full (100%) catch-up ($ millions) LPs contribute 100; the fund distributes 180 after five years; the pref is 8% compounded (46.93); carry is 20%. After capital and pref, the catch-up tranche is 0.20 × 46.93 ÷ 0.80 = 11.73, all to the GP. The remaining 21.33 splits 80/20 (LPs 17.07, GP 4.27). **GP total: 16.00, which is 20% of the 80 profit.** ### Partial (80/20) catch-up, same fund The catch-up tranche widens to 0.20 × 46.93 ÷ 0.60 = 15.64: the GP takes 12.52 and LPs 3.13. The remaining 17.42 splits 80/20 (GP 3.48). **GP total: 16.00 again.** A partial catch-up that completes leaves the final split unchanged; it only needs more profit to get there. ### No catch-up, for comparison Without a catch-up the GP receives 20% of the 33.07 above capital and pref: **6.61, or 8.3% of profit.** Compared with the full catch-up (16.00), the catch-up has raised the GP's carry from 20% of profit above the hurdle to 20% of all profit. ### Not enough profit to complete the catch-up If the fund distributes 150, only 3.07 remains after capital and pref. Under a full catch-up it all goes to the GP, but the catch-up stops well short of its 11.73 target. **GP: 3.07, or 6.1% of the 50 profit.** With a full catch-up and these terms, the GP reaches its full 20% only once profit is at least 58.67 (pref ÷ 0.80), that is, distributions of 158.67. Examples are illustrative; figures are not market data. ## Not the same as - [Preferred Return (Pref)](https://altss.com/glossary/preferred-return): The preferred return is the LP tier that comes first; the catch-up is the GP tier that follows it. - [GP Clawback](https://altss.com/glossary/clawback): A clawback returns carry that turns out to have been over-distributed; the catch-up is a scheduled tier of the waterfall. ## Common mistakes - Saying the catch-up only changes the timing of carry. Relative to the same waterfall without one, it increases the GP's total carry whenever the fund clears the hurdle. - Reading an "80/20 catch-up" as the final profit split. It describes the split inside the catch-up tier. - Assuming a partial catch-up leaves the GP with a smaller final share. If profit is enough to complete it, the GP ends at the full carry rate. - Forgetting that a catch-up can be incomplete, leaving the GP below its headline carry share. ## Edge cases - A catch-up share at or below the carry rate (k ≤ c) never completes, so limited partnership agreements (LPAs) avoid it. - If later losses reduce cumulative profit after a catch-up has been paid, the GP may hold more than c of final profit, which the clawback corrects. ## Questions ### Does a catch-up increase the GP's carry? Yes, compared with the same waterfall without one. Once complete, it gives the GP its carry percentage of all profit instead of only the profit above the hurdle. ### What does a 100% catch-up mean? Every dollar distributed in the catch-up tier goes to the GP until it has received its carry percentage of all profit distributed so far. ## Sources - [ILPA Model Limited Partnership Agreement (Whole of Fund and Deal-by-Deal versions)](https://ilpa.org/industry-guidance/templates-standards-model-documents/model-limited-partnership-agreement/). Institutional Limited Partners Association, ILPA, Whole of Fund first released October 2019, updated July 2020; Deal-by-Deal version and term sheet released 22 July 2020. Status: Current (checked 2026-10-01). Distribution provisions (Whole of Fund and Deal-by-Deal versions) — supports: GP catch-up as the waterfall tier following the preferred return ## Related terms 7 terms - [Preferred Return (Pref)](https://altss.com/glossary/preferred-return) - [Hurdle Rate](https://altss.com/glossary/hurdle-rate) - [Carried Interest (Carry)](https://altss.com/glossary/carried-interest-carry) - [European (Whole-Fund) Waterfall](https://altss.com/glossary/european-waterfall) - [American (Deal-by-Deal) Waterfall](https://altss.com/glossary/american-waterfall) - [GP Clawback](https://altss.com/glossary/clawback) - [Distribution Waterfall](https://altss.com/glossary/waterfall) ## Referenced by 1 term - [Distributions](https://altss.com/glossary/distributions) ## Concept record Concept ID ALTSS-ECON-008 Classification Fund economics Topics Fund terms & economics Version 2.0.0 Last reviewed 2026-10-01 Structured data [JSON](https://altss.com/reference/concepts/catch-up.json) ## Canonical URL https://altss.com/glossary/catch-up