For a first-time manager raising a sub- $25M fund, Decile generally recommends defaulting to the **European / whole-of-fund** waterfall.
If choosing **American / deal-by-deal** instead:
- GP may receive carry earlier on individual winners
- LPs usually expect **stronger clawback protection** if later deals underperform
- Cornerstone guidance suggests managing this with a **conservative GP reserve / holdback outside the fund**, since the template may have **no escrow**
- Update that reserve after each carry distribution based on worst-case clawback exposure
- Carry recipients should be told interim carry may need to be repaid later
References:
- https://decilehub.com/base/1-general_questions/163969-how-should-an-emerging-manager-think-about-choosing-between-an-american-waterfall-and-a-european-waterfall-when-structuring-carried-interest
- https://decilehub.com/base/1-general_questions/163615-how-should-emerging-managers-provision-for-the-gp-clawback-when-the-cornerstone-template-has-no-escrow
If choosing **American / deal-by-deal** instead:
- GP may receive carry earlier on individual winners
- LPs usually expect **stronger clawback protection** if later deals underperform
- Cornerstone guidance suggests managing this with a **conservative GP reserve / holdback outside the fund**, since the template may have **no escrow**
- Update that reserve after each carry distribution based on worst-case clawback exposure
- Carry recipients should be told interim carry may need to be repaid later
References:
- https://decilehub.com/base/1-general_questions/163969-how-should-an-emerging-manager-think-about-choosing-between-an-american-waterfall-and-a-european-waterfall-when-structuring-carried-interest
- https://decilehub.com/base/1-general_questions/163615-how-should-emerging-managers-provision-for-the-gp-clawback-when-the-cornerstone-template-has-no-escrow