Fees & Economics
What is Clawback?
A clawback provision requires a general partner to return carried interest it was overpaid if later losses mean limited partners did not receive their agreed share of profits.
A clawback protects LPs from a GP being overpaid carry on early winners while the fund as a whole underperforms. At the end of the fund’s life, if the GP has collected more carry than the final economics justify, the clawback obliges it to pay the excess back.
Clawbacks are most relevant in deal-by-deal ("American") waterfalls, where carry can be paid before the fund’s overall result is known.