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Catch-up

A waterfall stage where the manager receives a disproportionate share of profits after the preferred return is paid, until the agreed overall profit split is reached.

Catch-up — A waterfall stage where the manager receives a disproportionate share of profits after the preferred return is paid, until the agreed overall profit split is reached.

The catch-up rate — commonly 100% but sometimes negotiated to 50% or 80% — is a frequently overlooked lever: a lower catch-up rate shares more of the early post-hurdle profit with investors and slows how quickly the manager reaches its full stated carry percentage.

Frequently asked questions

What is a 100% catch-up?

A catch-up tier where the manager receives all post-preferred-return distributions until their cumulative share of profit equals the full stated carry percentage — the fastest possible route to full carry.

Is the catch-up rate negotiable?

Yes, and it is one of the more overlooked negotiating points in fund terms — a lower catch-up rate is a genuine, quantifiable concession a manager can offer.

Nothing on this page is legal, tax, or investment advice. SeRuM is not a registered broker-dealer, not a placement agent, and not an investment adviser.

WaterfallThe order in which distributions are split between investors and the manager, through retu Carried interestThe manager's share of fund profits, typically paid after a preferred return and a catch-u Preferred returnA threshold return investors receive before the manager participates in profits. Also call

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