Catch-Up
A Catch-Up is the distribution of funds to the managers of an investment entity to “catch-up” on an agreed upon return structure with the fund’s investors. A typical catch-up may be 20% after the investors have been returned 100% of their investment plus some preferred interest. For example, an investor invests $100 with a 10% preferred return. If the manager has a 20% catch-up, the investor would receive the first $110 of proceeds ($100 + $10), and then the manager would receive the next $27.50, so that out of the $137.50 distributed to date, the investor has received 80%, and the manager has received 20%.