Distribution Waterfall Introduction

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[thierryp]

Stumbled on this while I was starting my PE career at a large Canadian pension fund and have been hooked on your videos since. Really great material vulgarizing the more complex and nebulous financial concepts of private equity. Keep up the good work Peter! Everyone should sign up to your website. A LOT of quality stuff there.

[bryanlee]

I needed to gain an understanding of the cash flow/waterfall model for my upcoming internship assessment and this video helped me out so much! Thank you for making this video accessible to everyone!

[RoadAheadWithAJ]

Thank you so much! This is by far the clearest explanation of the waterfall I have come across. Its cleared up so many doubts for me

[MPS]

As somebody who just started a new job in PE without any other experience, thank you for this!

[rudyjones]

One of the best video series on youtube.

[satishnadigatla]

simple, clear and deep explanation.
Im not able to access link. Thaks

[guillaumedesclee]

Fantastic video. My questions are:
1. How do you include the management fees taken by the GP in this model?
- which impact on IRR and cashflows?
2. What about the investment commitments by the LP in these calculations?
- management fees are taken on the total amount committed or just the amount invested?
- same for hurdle rate?

Thks for your help!

[oliviercouton]

Awesome model & video : Now my questions are for a particular target allocation :
1- Would you alternate Money back / pref - Money back- pref or Money back-Money and then pref - pref for each partner ?
2 - What happened in :bad state of the world" where there is not enough to distribute ? Does 1 partner gets some of his investment back and the other gets a loss ?
3 -What happens when you implement the non-recourse liabilities of some contributed assets exceeds their basis ? How would do reflect a minimum gain chargeback in your model ?

[jherrod]

Thank you !! Very helpful. Where do you explain tab 4 and tab 5 for the IRR Hurdles?

[prashanthkumar]

Really cool explanation, I would like to suggest you to elaborate more as it will be more understandable for beginners like me. Thank you

[mr.pavanvlogindia]

Hi Sir,

Please explain Waterfall provision in private equity fund and also explain methods of European and American Waterfall methods.

[heykayy]

i love your explanation! you've just earned a new subscriber :)

[chanman]

could you include clawback into the model as wel?

[JK-ssyf]

Nice vid! Only seems as if catch-up is higher than pref return. I think that's not correct. Catch-up is typically only a quarter of pref return.

[TobiasTeeter]

Wait. Shouldn't the return original investment to LP be made and them the 20:80 starts above that line, thus catch up would be 25% of the preferred return about to get back to 20:80 split of PROFIT?

[ken-ipih]

8:58 Don't understand why you just didn't multiply the sum of row 42 and row 47 by 20%...
It still gives you the same number

[bhavanagangishetty]

Could u plz explain Fund Accounting as well..many people are in need of it...

[pardhasaradhivattigunta]

Very clear and clean explanation!!! Thanks

[xsweetlux]

I am not sure I understand why the pref return of 8% is calculated on the full $10m invested and not on $8m. Does this model assume that the LP funded the 100% of the capital in this transaction ? I assumed that the capital invested would have also been split 80-20 to begin with. If the model assumes that the LP funded 100% of the capital invested, then would the 20% proceeds going to the GP be considered their promote ? Hope this makes sense ! Thanks for the video

[guptaakhilesh]

Hi, in Step 3 you are assuming that 100% payout is being made to GP until GP receives 20% of overall return (Step 2 + Step 3). However can you provide a formula with same illustration wherein in step 3, GP will be getting 80% proceeds and LP will be getting 20% proceeds until GP received 20% of Overall return (Step 2 + Step3).