What is the difference between a European and an American waterfall?

A European, or whole-of-fund, waterfall returns all contributed capital and the preferred return across the entire fund before the general partner takes carry. An American, or deal-by-deal, waterfall tests each realization on its own, so carry can be paid years earlier. The same fund can pay the general partner in year three or year five depending only on which convention the agreement uses.

If a deal-by-deal waterfall paid carry early and the fund later underperforms, the general partner may have been paid more than the whole-fund test would allow. A clawback obliges them to return the excess. It is the structural consequence of paying carry before the fund's final result is known.

Does it produce ILPA-compliant capital call and distribution notices?

Capital call and distribution notices carry ILPA CC&D component codes, and expense lines carry ILPA line-item codes at the point of posting rather than being reverse-engineered at quarter end. A component breakdown is read off the call rather than reconstructed from it.

Private equity fund accounting software

The capital account is the deliverable. Everything else in a closed-end fund exists to move it, and most of the errors come from moving it in a spreadsheet.

Commitments are ledger events, not a side table

In most closed-end books the capital account lives in a spreadsheet alongside the accounting system, because the accounting system was built for open-end funds and does not know what uncalled capital is. That spreadsheet is then the source of truth for the number limited partners care about most.

Here, a commitment, a call, a drawdown and a distribution are events on the ledger with their own state. The capital account is derived from them. Uncalled is what is left after the calls that happened, not what somebody remembered to decrement.

✓Commitments, subsequent closes and equalization on late closers
✓Capital calls with purpose, notice and funding state
✓Recallable distributions and recycling policy, per fund
✓European and American waterfalls as configurable tiers
✓GP carry, per-principal vesting, clawback and LP givebacks
✓ILPA CC&D component codes on calls and distributions

Capital accounts for a drawdown fund: $46.5m committed, $37.2m called, $9.3m uncalled, with per-LP rows and a stated recycling policy. — **$46.5m committed, $37.2m called, $9.3m still uncalled.** Per limited partner and in total, with recallable capital and the fund's recycling policy stated rather than assumed.

Waterfalls as tiers, not as two presets

Almost every platform offers "European" and "American" as a dropdown. Almost no limited partnership agreement is either textbook case. Real agreements have a preferred return with a compounding convention, a catch-up at some rate to some target, a split that changes at a hurdle, and a whole-fund test that may or may not apply to the catch-up.

So a waterfall here is an ordered set of tiers with their own parameters, and the two named conventions are just two configurations of it. Carry is held as an accrual subject to its test rather than as settled fact, which is what makes clawback a calculation rather than a crisis. We worked the same fund through both conventions, with the numbers, in European vs American waterfalls.

A waterfall policy with four tiers - return of capital, accrued preferred, GP catch-up to 20 percent, split 80/20 - and a line reading GP carry received $532,840.19 against $555,041.87 entitled. — **The same seven answers, entered as tiers.** Return of capital, accrued preferred, a catch-up to 20% at 100%, then an 80/20 split, marked whole-of-fund and priced against an 8% preferred net of return of capital. Carry received sits beside carry entitled, because on a whole-fund test those are different numbers and the difference is the point.

Calls that move the account

A capital call is issued against commitments, noticed to the limited partners it draws on, and funded. Each of those is a state the call actually has, and the capital account moves because of the funding rather than alongside it.

Eight quarterly capital calls of $4,650,000 each, every one marked FUNDED. — **Eight quarterly calls, each with its purpose and funding state.** The schedule is the audit trail: what was drawn, for what, and whether it arrived.

The fund knows what kind of fund it is

Funding model is a property of the vehicle. A drawdown fund's dashboard leads with committed, called and distributed; an open-end fund's leads with subscriptions and redemptions. Neither is a setting somebody has to remember, and a platform that runs both does not need two products to do it.

A drawdown fund dashboard showing NAV, committed, called, distributed, position value and fees accrued. — **Committed, called and distributed replace the open-end tiles.** Off the fund's own funding model, not a configuration flag.

ILPA, as the template rather than as a claim

The ILPA Reporting Template v2.0 is a workbook with fixed rows, and it requires every field to be present. That is where most implementations get quietly dishonest: a row the book cannot source is emitted as zero, and a zero is indistinguishable from a real nil.

The ILPA Capital Account statement with a panel of honest-gap notes explaining which rows cannot be sourced and why. — **Every unsourceable row carries the note explaining it.** Carried interest accrued is zero here because the fund has no active waterfall policy, so no hypothetical liquidation can be run - and the statement says exactly that rather than letting the zero pass as a fact.

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Private equity fund accounting, waterfall included