Waterfall Profit Distribution Waterfall Model Examples
First thing first, what do you know about waterfall profit distribution? You may have heard of it often used in Private Equity investing and commercial real estate. A distribution waterfall is a method of profit distribution where the capital gains are allocated between the participants in an investment in a u201cwaterfallu201d manner. This means that usually, the general partners receive a disproportionately larger share of the total earnings relative to their initial investment once the process of allocation is complete. Basically, this method is used to give incentive to the general partners to further maximize profitability.
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