---
title: "What Is Catch-Up?"
term: "Catch-Up"
description: "Catch-up is a waterfall provision that allocates profits to the GP after the preferred return hurdle until the GP reaches its agreed carried interest percentage — typically 20% — of total profits above the hurdle."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["fund-economics"]
source: https://venturecapitaltracker.com/glossary/catch-up
---

# What Is Catch-Up?

> Catch-up is a waterfall provision that allocates profits to the GP after the preferred return hurdle until the GP reaches its agreed carried interest percentage — typically 20% — of total profits above the hurdle.

**Catch-up** is the allocation phase in a fund waterfall where profits flow to the GP until the GP's cumulative [carried interest](/glossary/carried-interest) share is restored — usually 20% of total profits above the hurdle.

### How it works

Standard order after returning LP capital:

1. LPs receive preferred return (hurdle) on contributed capital
2. **Catch-up:** GP receives distributions until GP has X% of all profits distributed above step one — often structured so GP ends at 20% of total profits
3. Remaining profits split 80/20 (or as negotiated)

Catch-up can be **full** (GP gets 100% of distributions until caught up) or **partial** (GP gets a stated percentage during catch-up). The difference materially shifts early distribution timing in successful funds.

Modeling matters for LPs comparing fund terms and for GPs forecasting partner carry receipts.

Some funds use **tiered carry** with different catch-up speeds by return band — reading the LPA waterfall exhibit line-by-line is essential because summary slides rarely capture ordering nuances.

Waterfall modeling spreadsheets from fund counsel are the authoritative reference — not verbal descriptions in pitch meetings or marketing decks alone.

### Why it matters

- **GPs:** Faster catch-up accelerates carry economics after hurdle clearance — important for partner retention mid-fund life.
- **LPs:** Negotiating catch-up percentage and ordering is as important as headline carry rate; small wording changes shift millions on large funds.

### Common mistake

Confusing catch-up with the management fee. Catch-up applies only to profits above hurdle in the waterfall — not to annual management fees charged on commitments regardless of performance.

### Related ideas

See also [carried interest](/glossary/carried-interest), preferred return, waterfall, and clawback.

## FAQ

### What is catch-up in simple terms?

After LPs hit their preferred return, catch-up sends a chunk of the next profits to the GP until the GP owns its full share — usually 20% — of all the profits above the hurdle.

### Why does catch-up matter?

For GPs, catch-up timing affects when carry dollars arrive. For LPs, a generous catch-up speeds GP enrichment; a slower catch-up keeps more interim distributions with LPs.


---
Source: https://venturecapitaltracker.com/glossary/catch-up