Clawback

A provision requiring a fund manager to return carried interest that exceeds what the fund's final overall performance justifies.

Example

A manager paid 6,000,000 of early carry must return 5,000,000 when later losses reduce justified carry to 1,000,000.

Its value depends on enforceability, such as personal guarantees or escrowed carry.

American (Deal-by-Deal) Waterfall — A distribution structure where the manager can receive carried interest on individual profitable deals as they exit, before the whole fund has returned LPs' capital.
Carried interest — The share of a fund's profit that the manager keeps, conventionally around twenty percent, usually payable only above a defined return to investors.

A hurdle protects LPs when returns are modest, and a catch-up gives it back when they are strong — Carried interest is the manager's share of profits. A hurdle rate means LPs receive a minimum return before carry is paid; a catch-up then lets the manager receive its full share once returns clear the hurdle. (14 min)
The clauses that decide what happens when something goes wrong — Beyond fees and carry, a fund's agreement governs who must stay, how capital can be reused, what happens if LPs lose confidence, and what you are entitled to know. (12 min)