> For the complete documentation index, see [llms.txt](https://docs.tactyc.io/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.tactyc.io/portfolio-construction/construction-wizard/waterfall.md). # Waterfall Define the profit splits between LP’s and GP’s. Tactyc supports both the American (deal by deal carry) and European (fund level carry) provisions. {% embed url="" %} ## European Waterfall (standard and more common) The European Waterfall follows this naming terminology: * **Distributable Proceeds** is the amount of proceeds that distributable to all Limited Partners * **Tier 1: Initial Investment Return** to all Limited Partners until they have been returned their initial investment. This is fixed to 100%. * **Tier 2 (optional): Preferred Return** to Limited Partners from remaining proceeds to achieve a specified IRR or multiple hurdle rate * **Tier 3 (optional): GP Catch-up** to General Partners from remaining proceeds to achieve a level commensurate with their profit interest (typically 20%) * **Tier 4: GP Carried Interest** to General Partners from remaining proceeds based on a carried interest (%) * **Remaining proceeds** all flow to Limited Partners ## American Waterfall The American Waterfall follows this naming terminology: * **Distributable Proceeds** is the amount of proceeds that distributable to all Limited Partners * **Tier 1: Initial Investment Return** to Limited Partners from LP attributable proceeds. This is fixed to 100%. * **Tier 2: GP Carried Interest** to General Partners from remaining proceeds based on a carried interest (%) * **Remaining proceeds** all flow to Limited Partners * **Optional Clawback:** If the fund has a clawback provision that lets GP claw into past distributions to LP’s check this option and set the hurdle rate at which GP’s can start clawing back. ## GP Commit Treatment * If the fund has a GP Commit, these GPs are treated as LPs for the purpose of the waterfall i.e. the GPs will recoup their committed capital along with the LPs and also participate in any preferred returns and LP profits commensurate with the GP Commitment %. These profits to GP (as an LP) are referred to as **GP Proceeds** in the fund's waterfall in Tactyc. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation by asking a question. Perform an HTTP GET request on the following URL with the `ask` and `goal` query parameters: ``` GET https://docs.tactyc.io/portfolio-construction/construction-wizard/waterfall.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is what the user is ultimately trying to achieve, the reason they need the answer. Sharing it helps GitBook give you a better, more relevant answer. A goal is most helpful when it describes the outcome the user wants rather than restating the question. For example, with `ask=how do I create an API token`, a goal like `automate deployments from our CI pipeline` lets GitBook tailor the answer to that use case. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.