Equity Waterfall – IRR Hurdle Conventions

This model demonstrates how different compounding conventions—annual, semi-annual, quarterly, or monthly—change the effective hurdle rate and impact when the promote actually kicks in. For example, a nominal 9% annual hurdle isn’t the same as a 9% monthly hurdle (which is closer to 9.38% annually).

With this tool, you can:

• Compare IRR hurdles across multiple compounding conventions.
• Normalize returns to a common effective annual rate, avoiding GP/LP “apples-to-oranges” misalignment.
• See in real time how waterfall distributions shift under each convention.
• Use clear, transparent formulas that you can adapt to your own partnership agreements.

Perfect for sponsors, LPs, and advisors who want to stress-test partnership docs, confirm hurdle alignment, and ensure promote structures reflect true deal economics.