Fund economics

Clawback

Also called GP clawback, carry giveback, general partner giveback.

Definition

Clawback is a provision in the limited partnership agreement that obliges the general partner to return carried interest already distributed to it if, measured over the life of the fund, it has received more than its agreed share of net profit or limited partners have not received their capital and preferred return in full.

Updated October 9, 2026Checked against our editorial standards

Example

A fund with a deal-by-deal waterfall and 20% carry sells its first company. It invested $5M and receives $15M, a $10M profit, and the GP takes $2M of carry. Two years later a second company, which cost $8M, is written off. At wind-up the fund has invested $13M and returned $15M, a net profit of $2M. The GP was entitled to 20% of that, or $400,000, but has received $2M. The clawback obliges it to return $1.6M, usually reduced by the tax the GP's partners already paid on the carry, as set out in the LPA.

Confused with

Holdback. The holdback is the escrow of part of the GP's carry that exists to fund a clawback. The clawback is the obligation itself, and it applies whether or not anything was escrowed.

LP giveback. Runs the other way: LPs return distributions to cover a fund liability such as an indemnity claim. Clawback is only ever the GP returning carry.

In practice

Clawbacks are tested at liquidation and, in some LPAs, at interim dates. Because the carry has often been paid out to individual partners of the GP and taxed, the LPA usually requires each of them to guarantee their share personally. LPs and auditors look for the test to be modelled every year alongside the accrued carry, not discovered at the end.

Related terms

Carried interestCarried interest is the general partner's share of a fund's profits, typically 20%, paid through the distribution waterfall only after limited partners have received their contributed capital and, usually, a preferred return.
Distribution waterfallA distribution waterfall is the sequence in which a fund's proceeds are allocated between limited partners and the general partner, typically return of contributed capital first, then a preferred return to LPs, then a catch-up to the GP, then the remaining profit split at the carried interest rate.
HoldbackHoldback is an amount a fund retains from proceeds instead of distributing it, either carried interest kept in escrow so that a later clawback can be funded, or a reserve held against known or expected liabilities, fees and follow-on needs, released when the condition it was held for has passed.
Catch-upCatch-up is the tier of a distribution waterfall, paid after limited partners have received their capital and preferred return, in which the general partner receives all or most of the next proceeds until it has received its agreed percentage of total profit.