GP catch-up
After the applicable return of capital and preferred return, the catch-up directs most or all of the next eligible profit distributions to the general partner (GP) until it has received its agreed share of those profits. Returned capital is excluded from that profit base; the partnership agreement determines the calculation and sequence.
Also called Catch-up
GP catch-up in round numbers
Hypothetical 100%-GP catch-up: after returning capital of 100 and paying a preferred return of 8 to LPs, distribute the next 2 of eligible profit to the GP. The GP then has 2 ÷ (8 + 2) = 20% of profit distributions; returned capital is excluded. Split subsequent eligible profits 80/20 in this example. The partnership agreement determines the actual sequence, catch-up rate and profit base.
For the separation of returned capital from catch-up profit distributions, see the Institutional Limited Partners Association whole-of-fund model partnership agreement, section 14.3. Its bracketed model uses an 80/20 catch-up tier; the 100%-GP example above is a different convention.
Terms Related to GP catch-up
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