Distributions
Distributions are cash or in-kind proceeds returned from a fund to LPs.
Allocator relevance: High — distributions are the realized proof of performance and a primary driver of DPI, liquidity planning, and re-up capacity.
Expanded Definition
Distributions can be cash (sale proceeds, interest, dividends) or in-kind (securities or assets transferred to LPs). They may represent return of capital, profits, income, or a mix depending on fund accounting and structure. Timing is influenced by exit events, repayment schedules (credit), reserves/holdbacks, and GP discretion under the LPA.
Allocators separate “quality distributions” (value realization) from distributions that are largely timing/financing driven, and they track distribution sustainability under market stress.
Decision Authority & Governance
Governance includes fair pro-rata treatment, reserve policies, in-kind distribution rules, and transparency on characterization. Allocators reconcile distributions using distribution notices, capital account statements, and audited financials, and they scrutinize any opaque netting or inconsistent reporting.
Common Misconceptions
- All distributions are profit (many are return of capital).
- In-kind distributions are always negative.
- Distribution timing is purely mechanical (GP discretion/reserves matter).
Key Takeaways
- Distributions are the realization engine behind DPI.
- Characterization matters for analysis and taxes.
- Strong notices + reconciliations signal institutional reporting.