The waterfall is becoming a fundraising consideration
Limited partners are scrutinizing how distributions are calculated, communicated, and governed before committing capital. CSC’s campaign explores where transparency breaks down and what managers can do to create a more traceable process.
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64% of LPs have pushed back on waterfall provisions lacking transparency
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39% have chosen not to commit
What the evidence shows
Investors want to verify the calculation
86% consider clarity on the timing and structure of distributions important or critical.
Complexity is increasing
74% say waterfall structures have become more complicated.
Managers are investing in greater control
75% expect to outsource more waterfall activity.
Hear from the experts
CSC specialists discuss why waterfall transparency is becoming part of investor diligence, where operating processes commonly break down, and how managers can make existing information easier to verify.
Should managers show investors where they are in the waterfall?
Why investor expectations are changing
Where reporting and ownership break down
What a practical transparency exhibit could contain
What this looks like in practice
Situation
Situation
An LP asks a fund approaching a re-up to show where it currently sits in the waterfall.
Complexity
Complexity
The information exists across the LPA, spreadsheet, investor statements, and internal calculations.
Response
Response
The manager defines one traceable exhibit with clear ownership and a consistent reporting cycle.
Lesson
Lesson
The challenge is not only producing the correct calculation. It is making the calculation verifiable.
A practical framework for greater waterfall transparency
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Define the calculation methodology
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Identify investors with divergent terms
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Assign ownership of the model and review
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Report realized and unrealized positions consistently
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Link reporting outputs to the relevant LPA provisions
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