Clawback conversations: A quarter of GPs flag clawback risk as growing concern

Our exclusive report with Private Equity Wire looks at GP attitudes and preferences when it comes to waterfall structures and clawback risk.

16 October 2024 - A quarter of GPs have either experienced, or are expecting to experience an increase in clawback risk over the coming 12 months, according to an exclusive report from Citco and Private Equity Wire.

This report surveyed GPs about their experiences with clawback risk and waterfall structures, delving into the reasons behind growing concerns over clawbacks – it also looks at attitudes towards having these conversations with clients, and how GPs can mitigate risks by using different waterfall structures.

According to Tim Eberle, Head of Waterfall Services, Citco Fund Services (USA) Inc., there is a gap in the market that needs addressing upfront, to ensure a healthier foundation for collaboration. “A proper clawback mitigation strategy: whether through structural means such as multiple preferred return tiers, mandatory recoupment of unrealized losses), or others; or operations means such as detailed scenario analytics and downside analysis could allow for a GP-friendly compensation structure, while simultaneously avoiding the potential risks to the LP-GP relationship that the survey indicates as a primary concern.”