Waterfall Calculation Beta Now Live

Here is a common waterfall structure we see used in practice:

First, Class A receives an 8% preferred return

Second, Class A receives a full return of capital

Lastly, 80% goes to Class A and 20% goes to Class B

 

Here is how this looks in the waterfall setup

Navigate to Portfolio > Offering > Distributions > Waterfall > Setup Waterfall

Tier 1 Setup Procedure: 8% Preferred Return

To set up Tier 1 from the table, click on "Add Tier" and complete the following details:

Description: This section serves as a space for internal use, allowing you to provide a clear and descriptive title for each tier. For instance, you can label it as "Preferred Return at 8% annually."

Preferred Return: Input the Preferred return as 8%. Since the preferred return only pertains to Class A, Class B remains empty during the setup of Tier 1.

Select the Accrual Start Date from the dropdown menu, where you can choose between two options:

1. Funded Dates 

2. Override Dates

Override Dates allow you to manually pick a date from which the calculation of returns, such as interest or profit sharing, begins for the investors.

Compounding: Compounding will accrue additional interest at the preferred rate to any outstanding balance. You may pick either "Do not compound" or Compound Monthly, Quarterly or Annually based on your deal type.

Day count: Day count convention determines how interest accrues over time and is displayed as the number of days in a month over the number of days in a year. 

Reminder Rule: Choose "Withhold" to ensure that any remaining fractional amounts, which cannot be evenly are held back.

As the last step of Tier 1 setup, check or uncheck on the checkbox to Display "Accrued Balance to the investors" based on your preference. 

Tier 2: Setup Procedure: Return of Capital

To create another Tier, Click on Add Tier, but this time choose the Return of Capital from the drop down and include a relevant Description and the fill in the respective fields below

Return of Capital to: Click on the Class A checkbox for the Return of Capital, which is designated for the limited partners (LPs).

Choose the "Withhold" option for the Remainder Rule in Tier 2 to retain any remaining balances, just like in Tier 1.

Final Tier: Upside 80/20 Split

In the Final Tier, which is the last tier of the waterfall structure, you can provide a description and allocate ownership percentages for Class A and Class B at 80% and 20%, respectively, as specified in our example. Remember to set the remainder rule to "Withhold" and click Save to begin calculation. This will lead you to a Summary page where you can review the tiers and their details.

After completing the calculations, you will be able to view the Calculations Summary & Balances from a Tier Level, Investors Level, Investor Class level, or Offering Level displayed on the tabs located on the right side of the screen.

This detailed summary provides a comprehensive overview of how the investment returns, income, and profits are distributed among general partners (GPs) and limited partners (LPs) based on the specified Waterfall structure.

You have the option to choose different date ranges for more precise Calculations. 

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