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Concepts

December 31, 2017

5 min read

Understanding Private Equity Waterfalls, Clawbacks, and Catch-Up Clauses

In private equity, a 'waterfall' refers to the priority sequence in...

In private equity, a 'waterfall' refers to the priority sequence in which profits from an investment are distributed among the general partners (GPs) and limited partners (LPs). It's akin to a multi-tiered waterfall, where the water - the profits in this analogy - cascades down different levels, each representing a phase in the profit distribution process.

Consider an example: A real estate fund acquires a property, invests in improvements, and then sells it at a profit. According to a typical 'European Waterfall' structure, the first tier - the top of our waterfall - ensures the return of the original capital to the LPs. The second tier provides the LPs with their preferred return, a predefined percentage on their initial investment.

Only after these two levels are satisfied does the waterfall flow to the third tier. Here, the remaining profits, often called 'excess profits,' are divided between the LPs and GPs. It's common for this split to favor the GPs, typically around an 80-20 LP-GP ratio, incentivizing fund managers to exceed the preferred return threshold.

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March 2, 2020

5 min read

How to Choose the Right Real Estate Fund for your Portfolio...

As an accredited investor, you have the opportunity to invest...

As an accredited investor, you have the opportunity to invest in a variety of alternative assets, including multifamily real estate development funds. These funds offer a unique investment opportunity, providing access to a stable asset class with the potential for strong returns.

But with so many options available, how do you choose the right multifamily real estate development fund for your investment portfolio? Here are some tips and advice for selecting a fund that aligns with your investment goals and risk tolerance:

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