Every distribution waterfall run on its own from the LPA and checked tier by tier, before a dollar of carry is paid
Every distribution checked tier by tier against the LPA, before a dollar of carry is paid.
See one case, screen by screen ↓Distribution Waterfall Calculation is distribution waterfall software for private fund finance. A distribution waterfall, or carried interest waterfall, decides how each distribution is split between the LPs and the GP: return of capital, preferred return, GP catch-up, then the carried interest split. Seven agents read the LPA and side letters, run every waterfall on their own, explain each gap with the administrator's model tier by tier, allocate to every LP and draft the notices; the fund controller checks and the GP CFO signs.
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Every closed-end private fund runs its distribution waterfall at each distribution: return of capital, then the preferred return, then the GP catch-up, then the carried interest split, with different terms in every LPA, amendment and side letter. Most managers keep these calculations in spreadsheet models, often the fund administrator's, and fund finance checks them by re-performing the model by hand, several hours for a simple European fund and days for an American waterfall with write-downs, all inside the notice period the LPA sets. Sometimes nobody re-performs it at all.
The errors sit in the conventions: whether unpaid preferred return compounds, the day count, the write-downs left out of a deal-by-deal waterfall, a management fee offset applied after instead of before the waterfall, an IRR hurdle dated at quarter end. Each one moves money between the LPs and the GP. A carried interest overpayment surfaces at audit, in an LP's review or as a clawback years later, and the SEC has cited private fund advisers for overcharging carried interest. From 2026 LPs receive the ILPA carried interest reconciliation and can re-perform the numbers themselves.
Estimated split for a simple European whole-fund distribution, by hand and with the solution. The working solution's Q3 report shows a median of 1.6 days from the administrator's model to signature; the split is to be measured in the pilot.
Seven agents read the LPA, run every waterfall on their own and explain each gap with the administrator's model; the controller checks, the GP CFO signs.
Quillfield Private Equity Fund III, L.P. — a 2019 Delaware fund with $1.4 billion of commitments from 214 LPs and a European, whole-fund waterfall — sold Calder Ridge Packaging and is distributing $48,000,000 on Friday, October 30, 2026, with notices due Friday, October 23. Here is how the controller, the agents and the GP CFO work it through, screen by screen, in the working solution.
Grace checks every distribution before it goes to the GP CFO. Her Today screen shows 23 open distributions worth $478.6M, 5 differences to decide ($1.78M between the independent runs and the administrator models), 11 notices due by Friday and 1 clawback exposure not covered. At the top of Needs you: Fund III Distribution 17, check the corrected waterfall. Beside it, what the agents did overnight, every line cited.
Diff agent · 8:05 a.m.: “Fund III: the administrator agreed to the $412,000 correction; model v3 matches.”
Distributions lists 23 open distributions, across 23 of the 40 vehicles, in three groups: needs a decision, with the agents or an administrator, and with the controller. Each row shows the amount, the notice date, the independent run against the administrator's model and who holds it. She can filter by strategy, waterfall type (European, American, IRR promote, deal-level, MOIC-tiered, incentive allocation), administrator and notice date. Fund III Distribution 17 reads “Agreed in model v3 · $412,000 corrected to the LPA”.
Opportunistic Credit I: “Administrator model missing” — the independent run is ready and the request is drafted.
Fund III's waterfall terms sit in term table v4, prepared by Rafael Ortiz and approved by Grace Whitfield on March 3, 2026, read by the Terms agent from the agreement, 3 amendments and 61 side letters. Each term cites its clause with a confidence: a European (whole-fund) waterfall, an 8% preferred return compounded annually on each December 31, Actual/365, a 100% GP catch-up until the GP has 20% of profits and an 80/20 carried interest split. The §9.5 in-kind valuation read at 86%, below the 95% line, so a person confirms it, and it is flagged for fund counsel with the question already drafted; proposed Amendment No. 3 waits for the checker.
Below 95% confidence a person confirms the term; an ambiguous clause goes to counsel, never a guess.
The Model agent ran Distribution 17 from the approved term table and the capital ledger alone. The $48,000,000 pours through four buckets: return of capital $36,374,871 (§9.1(a)), preferred return $8,937,129 at 8% compounded yearly (§9.1(b)), and $2,688,000 of GP catch-up, 100% to the GP until it has 20% (§9.1(c)). The 80/20 carried interest split is not reached. The clawback gauge beside it shows $2.69M of carry paid against $247.5M of whole-fund carry at the June 30 NAV: no exposure.
The Model agent never reads the administrator's model, and never overwrites a run: what-ifs are separate scenarios.
Six minutes after the run, the Diff agent opened the administrator's model v2, received by file drop, read every formula and compared it tier by tier. Return of capital agrees; the preferred return is $412,000 lower and the GP catch-up $412,000 higher, $3,100,000 where the LPA allows $2,688,000. On Tuesday morning Grace asks in the thread beside the waterfall, “Show the §9.1(b) arithmetic”: unpaid preferred return of $6,055,242 at December 31, 2025, plus $148,553 accrued on the December 10 call, makes a base of $6,203,795 that compounds into 2026, and 8% × 303/365 of it is $412,000. Every figure links to its clause, ledger entry or cell.
Diff agent: “The administrator's 'Pref'!F18 leaves the base out. §9.1(b) puts it in.”
The difference in plain words: what the agreement says, §9.1(b), beside what the administrator's model does, 'Pref'!F18 = C18*0.08*D18/365, a simple accrual on capital only. Rafael accepted the independent run with reason code R1 and the Diff agent drafted query Q-2291; Grace approved sending it. On October 20 at 8:05 a.m. the administrator replied: model v3 compounds per Section 9.1(b). The look-across found the same formula on Fund III (Lux) SCSp Distribution 9: $91,600.
The Diff agent never edits the administrator's model and never sends a query without approval.
The Allocation agent split the distribution across 214 LPs, and the LP totals tie to the tiers to the dollar. Five exceptions: Kiyomi Life Insurance Co.'s W-8BEN-E expired September 30, 2026, and Saint Alder Health Foundation changed its bank details through the portal, so both payments are held. Nordwind Versorgungswerk's side letter sets its carry at 15%, shown in the German original beside the English; Brookmere University Endowment's transfer and Marlow County Employees' Retirement System's excused call are applied.
The Allocation agent never pays and never changes LP bank details: Saint Alder stays held until the call-back to the contact on file confirms them.
Grace checks $48,000,000, $45,312,000 to the LPs and $2,688,000 of GP carry; the check confirms she did not prepare it and holds no carry in Fund III, and she records reason code R1, Independent run follows the LPA. Daniel then sees who prepared and who checked, that he holds no carry in Fund III and that every tier cites its clause, and signs with a passkey: “Signed on the independent run: §9.1(b) compounds annually. Catch-up $2,688,000, not $3,100,000.” The payment file goes to the treasury payment system with 212 LP payments, $43,481,577, and 2 held, and the evidence pack is sealed.
“I approve this distribution and the carry it pays, as officer of the General Partner.”
The Notice agent drafted all 214 notices with the tier breakdown, the payment date and the account ending, and courtesy translations where an LP asked. Hannah previews Nordwind's Distribution Notice No. 17 with the German translation beside the English, then releases 212 notices to the investor portal. Release was locked until the signature; the two held LPs are excluded.
The Notice agent never sends: notices release only after the GP CFO signs.
The Clawback agent tests the 9 main funds that have paid interim carry, each with its parallel funds and AIVs, at the June 30, 2026 NAV; Fund III, with this distribution, shows no exposure. Real Estate V, an American (deal-by-deal) fund, has paid $14,200,000 of carry against $9,600,000 the whole fund supports. After tax at 41% under §12.6 and $1,894,000 of escrow under §12.4, $820,000 is not covered, so it is escalated to Daniel Price and Victor Lindqvist with an LPAC note drafted; Victor accepts the escalation or edits the note.
The Clawback agent never moves or releases escrow and never contacts LPs.
The same distribution waterfall, seen by five of the people who carry it — what their week looked like, and what it looks like now.
Seven agents read the LPA, run every waterfall on their own and explain each gap with the administrator's model; the controller checks, the GP CFO signs.
Reads LPAs, amendments and side letters in any language into a cited term table: waterfall type, preferred return rate, compounding and day count, catch-up, split, GP commitment, offsets, write-downs, clawback, escrow and side-letter economics, each with its clause and page.
Runs each distribution waterfall independently from the approved term table and the capital ledger, per LP and per tier, with day counts and compounding; what-ifs on request.
Compares the independent run tier by tier with the administrator's model, reads its formulas, explains each gap in plain words with the clause, the cell and the arithmetic, drafts the query and looks across other vehicles.
Tests interim carry every quarter against a whole-fund hypothetical liquidation at NAV for every vehicle that has paid carry, with the after-tax limit, escrow and guarantees, and drafts the LPAC note for an exposure not covered.
Allocates each distribution to every LP, with commitment shares, excused investors, side letters, transfers, tax forms and bank detail checks.
Drafts every LP notice with the tier breakdown, the payment date and the account ending, with courtesy translations where the LP asked.
Builds the hash-chained record of every run and the evidence pack per distribution and per period: inputs, terms with citations, both models, differences, decisions, signatures, notices and the payment file.
Check, sign, release. The agents propose; a named person decides.
Ask about any distribution, tier, investor or fund, or say what to do. The answers come with their sources, and the agents act only with your approval.
Why is Fund III's carry $412,000 lower than the administrator's?
Section 9.1(b) compounds the preferred return each December 31. The administrator's rebuilt model accrued 2026 on capital only, in 'Pref'!F18, leaving $6,203,795 out of the base. 8% × 303/365 × $6,203,795 = $412,000 more for the LPs and less catch-up for the GP: $2,688,000, not $3,100,000. The administrator agreed at 8:05 a.m.
How much carry have we paid this year, and is any at risk?
$46.2M of carry paid in 2026 across 11 vehicles. One exposure is not covered: Real Estate V, $2,714,000 after tax against $1,894,000 in escrow, so $820,000. Real Estate IV and Direct Lending I are on watch.
Which notices are at risk of missing their date?
11 notices are due by Friday. Two need attention: Infrastructure I is due today and waits for Daniel Price's signature; Opportunistic Credit I has no administrator model yet, and its independent run is ready.
Prepare the evidence pack for Fund III Distribution 17
The pack holds the term table with every clause cited, the independent run, the administrator's models v2 and v3, the $412,000 difference with its arithmetic, Rafael Ortiz's decision (R1), the query and the reply, the check, the signature, the 214 notices, the payment file and the hash chain.
13 screens from the working solution, on its sample data. Pick one to see it large.
The rules every distribution waterfall is checked against are settings. The platform administrator proposes a change, the controller approves it, and each version is on the audit trail.
| Setting | Default | Choose from |
|---|---|---|
| Difference tolerance per tier | $1,000 or 0.01% of the distribution, whichever is lower | Platform administrator proposes; controller approves |
| Notice clock | 5 business days before payment | Platform administrator proposes; controller approves |
| Distributions paying carry | Maker → controller → GP CFO | Maker, checker and signer are always different people |
| Distributions over $100,000,000 | Second signer: COO | Platform administrator proposes; controller approves |
| Escrow release | GP CFO and CCO | Platform administrator proposes; controller approves |
| Query to an administrator | Controller approves before sending | Platform administrator proposes; controller approves |
| Administrator model missing at T−2 | Controller may check on the independent run alone (policy 4.2) | Platform administrator proposes; controller approves |
| Rounding | To the dollar, largest remainder across LPs | Platform administrator proposes; controller approves |
Every figure is labelled: a target the solution is built to, an estimate, a typical published result, or a proven one.
“demo” = seen in the working solution, on its sample fund data · “target” = the design goal, measured in the live solution · “estimated” = our estimate · “typical” = published figures (The Drawdown, Fund Admin Report 2025 — private equity assets under administration at the 12 largest administrators up $705 billion in a year; SEC Division of Examinations risk alert, January 27, 2022 — more than 5,000 registered advisers managing about $18 trillion of private fund assets; SEC OCIE risk alert, June 23, 2020, on overcharged carried interest; ILPA Templates Hub — Reporting Template v2.0 from Q1 2026, quarterly reports suggested within 60 days after quarter end for direct funds, deferring to the LPA). Quillfield Capital and the funds, companies, investors and people named on this page are fictional — characters and sample data in the working solution.
Distribution Waterfall Calculation is distribution waterfall software for private fund finance. A distribution waterfall, or carried interest waterfall, decides how each distribution is split between the LPs and the GP: return of capital, preferred return, GP catch-up, then the carried interest split. Seven agents read the LPA and side letters, run every waterfall on their own, explain each gap with the administrator's model tier by tier, allocate to every LP and draft the notices; the fund controller checks and the GP CFO signs.
Each distribution fills the tiers in the order the LPA sets. In the sample private equity distribution waterfall, Fund III's $48,000,000 returns $36,374,871 of capital, pays $8,937,129 of preferred return at 8% compounded annually, then $2,688,000 of GP catch-up at 100% until the GP has 20% of the profits; the 80/20 split is not reached. The Model agent runs this per tier and per LP from the approved term table and the capital ledger.
Yes. A European waterfall pays carry on the whole fund's result; an American waterfall pays it deal by deal. The sample firm's 40 vehicles include European (whole-fund) and American (deal-by-deal) waterfalls, IRR promotes, deal-level co-investments, MOIC-tiered continuation funds and incentive allocation. The term table records each fund's type, and the differences it finds include write-downs left out of a deal-by-deal waterfall and IRR hurdles dated at quarter end instead of the actual cash-flow dates.
The LPA decides the preferred return calculation. Fund III's §9.1(b) compounds 8% annually on each December 31, Actual/365; the administrator's model accrued 2026 on capital only. The Diff agent read the formula, 'Pref'!F18, set it beside the clause and showed the arithmetic: $412,000 moved from the GP's catch-up back to the LPs, corrected before payment.
Every quarter the Clawback agent tests interim carry against a whole-fund hypothetical liquidation at NAV for every vehicle that has paid carry, after the tax limit and escrow. In the sample, Real Estate V has paid $14.2M against $9.6M the whole fund supports; after tax at 41% and $1,894,000 of escrow, $820,000 is not covered, so it goes to the GP CFO and the CCO with a drafted LPAC note.
The quarterly report shows the carried interest reconciliation fields of the ILPA Reporting Template v2.0 filled for 38 of 40 vehicles in the sample, with the two open-ended funds marked not applicable, alongside the distributions run, carry paid and the differences found and corrected before payment. The numbers come from the audit trail.
Yes. The agents never pay, sign, send a notice or a query, change a term or move escrow. Fund finance decides each difference with a reason code, the controller checks, the GP CFO signs with a passkey and investor relations releases the notices, and anyone who holds carry in a fund is blocked from all three decisions on it.
The Agentic Solution Engine builds and deploys it from your requirements and documents — your LPAs, side letters, the administrators' models and a sample of past distributions — and it goes live once every quality gate has passed. First-time setup connects your systems, reads your fund documents into term tables for approval and runs in parallel with your current process before go-live.
Every NAV checked against your books before it goes out, with breaks held, not published.
1-min demoFund Administration OversightEvery administrator graded on its evidence, with the cause of each error found and fixed.
1-min demoFund Expense AllocationEvery invoice split with its LPA clause, and nothing the manager owes charged to a fund.
1-min demoWe'll run Distribution Waterfall Calculation on your own LPAs and a sample of your past distributions.