Distribution Waterfall
Definition of 'Distribution Waterfall'The order in which a private equity fund makes distributions. A distribution waterfall is a hierarchy delineating the order in which funds will be distributed, and may ensure that different types of investors have priority of payment compared to others within the same fund. |
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Investopedia explains 'Distribution Waterfall'A distribution waterfall describes the method by which capital is distributed to a fund's investors as underlying investments are sold. It specifies, for example, that an investor will receive his or her initial investment plus a preferred return before the general partners can participate in the profits. Such an arrangement can increase the investor's confidence in the equity fund and its potential profitability for them. |
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