easy · Private Credit & Debt fund-structures-returns-economics

In the context of private credit fund economics, what is the primary purpose of a 'GP Catch-Up' provision in the distribution waterfall?

1. To allow the GP to receive their full share of total profits once the hurdle rate is achieved
2. To ensure the GP's personal co-investment remains equal to 5% of the total fund size
3. To compensate the GP for any management fee discounts offered to early investors
4. To adjust the hurdle rate upward if the Secured Overnight Financing Rate (SOFR) increases

Sign up free to see the explanation and track your rank →