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A private fund's whole-fund waterfall: return of capital, 8 % preferred return, full catch-up, 80 / 20 split, TVPI and net IRR

Tool	Fund Waterfall
Source	Institutional Limited Partners Association (2019). ILPA Principles 3.0: Fostering Transparency, Governance and Alignment of Interests for General and Limited Partners. ILPA, Washington, DC. GP and Fund Economics, pp. 10–12 (whole-of-fund waterfall, preferred return, clawback). The numbers are an illustrative fund worked from the closed forms; the Principles print no numerical example.
Level	Professional

Problem

A fund with 100 of committed capital (2 % from the manager itself) calls 40, 30 and 20 at the start of 2021, 2022 and 2023 and distributes 75, 45 and 8 at the start of 2024, 2025 and 2026; it still holds investments worth 12. The investors are owed their capital back, then an 8 % preferred return compounded yearly; the manager then catches up in full and takes a 20 % carried interest. Split the distributions tier by tier and find the carry, DPI, RVPI, TVPI and the gross and net IRR.

Inputs to Enter

Committed capital 100, GP commitment 2 %, remaining value 12
Contributions 40 / 30 / 20 on 2021-01-01, 2022-01-01, 2023-01-01; distributions 75 / 45 / 8 on 2024-01-01, 2025-01-01, 2026-01-01
Preferred return 8 % compounded yearly, carried interest 20 %, catch-up 100 %

Open the Fund Waterfall tool (loaded with this example)

Answers

Investors' side: contributed 0.98 × 90 = 88.20, distributions 0.98 × 128 = 125.44
Preferred-return account: 39.20 → 71.74 → 97.07 → 104.84 − 73.50 = 31.34 → 33.85, paid as 14.70 of capital and 19.15 of preferred return
Tier 1 = 88.20; tier 2 = 19.15; tier 3 = 0.2 × 19.15 / (1 − 0.2) = 4.79 (all to the manager); tier 4 = 125.44 − 88.20 − 19.15 − 4.79 = 13.30 (10.64 / 2.66)
Carry = 4.79 + 2.66 = 7.45 = 20 % of the profit 37.24; investors receive 117.99
Remaining value: investors' share 0.8 × 0.98 × 12 = 9.41, carry accrued 2.35
DPI = 117.99 / 88.20 = 1.34; RVPI = 9.41 / 88.20 = 0.11; TVPI = 1.44; gross multiple 140 / 90 = 1.56
Gross IRR 16.85 % a year; net IRR to the investors 14.16 % a year
Advanced mode (2 % management fee, rows assigned to three deals): fees 6.29, whole-fund carry 6.19, carry paid deal by deal 8.86, clawback 2.67

Notes

The tool's default inputs are this case; press Submit. Time is counted in whole anniversaries of the first date, so each row here is exactly one year apart. Checked by hand, against an independent numpy / scipy implementation and against a brute-force allocation in 40,000 slices per distribution (test_fund_waterfall.php). A calculator for education and analysis, not investment advice.