How to Track a Clawback Provision as an LP

How to track a clawback provision is an LP carry-correction ledger across the life of a fund, not a one-line note that “clawback exists.” For each fund, log the waterfall type, whether clawback is interim or end-of-fund only, gross-of-tax vs net-of-tax math, escrow or guarantee mechanics, disclosure cadence, current estimated exposure (if reported), and status. Raziel's PE waterfall tracking page is how carry is earned. This page is how excess carry comes back.

This is not legal, tax, or investment advice. Raziel does not provide it. Copy the LPA clawback article and the latest GP disclosure. Do not invent an escrow percent.

What this clawback ledger is (and is not)

A clawback provision requires the general partner to return previously distributed carried interest if, after applying the agreed waterfall, the GP has received more carry than it is entitled to once LP capital and the preferred return are made whole. ILPA Principles 3.0 states that actual and potential clawback liabilities should be determined and clearly disclosed to LPs as of the end of every reporting period, that annual audited financial statements should include those disclosures along with a GP plan to resolve the clawback, and that clawback amounts should be gross of taxes paid and repaid no later than two years after recognition of the liability. ILPA also encourages joint and several liability of individual GP members, interim clawback triggers (for example at defined intervals or on key-person or removal events), and an escrow of at least 30% as one mechanism for the clawback guarantee. Those are ILPA recommendations. Your LPA and side letters control.

Seven columns on one clawback row

Open one row per fund (child rows if parallel vehicles or different LP classes have different clawback language). Attach the LPA clawback section, any escrow agreement, and the latest audited notes.

• Waterfall context. Deal-by-deal (American) vs all-capital-back (European) style. ILPA notes that an all-capital-back structure is the best approach to minimize clawback liabilities. Copy which structure your fund uses.

• Interim vs end-of-fund only. Whether the LPA tests clawback periodically (annually or at distributions) or only at final liquidation. ILPA: conditions triggering interim clawbacks should be well defined. Store the test dates and event triggers.

• Gross vs net of tax. ILPA preference is gross of taxes paid. If the LPA is net of tax, copy the hypothetical tax methodology and whether preferred return is reflected. Do not paste “gross” because it is best practice.

• Escrow / guarantee. Escrow percent and custodian, parent or individual guarantees, and whether liability is joint and several. ILPA: escrow of at least 30% may provide a sufficient mechanism; joint and several is strongly encouraged. Copy yours.

• Disclosure cadence. Whether annual audited financials disclose actual and potential clawback, and whether interim reporting exists. ILPA: disclose as of every reporting period with a resolution plan.

• Estimated exposure (if reported). The GP’s stated potential clawback liability, date of the estimate, and whether unrealized marks are included. Leave blank and mark “not disclosed” if the GP is silent. Do not invent a number from your own waterfall model unless you label it as your estimate.

• Status. None disclosed, potential only, recognized liability, repayment in progress, or closed. Update when a repayment lands or a plan changes.

Copy the LPA, not a blog’s 30 percent default

Do not paste ILPA’s 30% escrow figure onto a fund that escrowed 20% or none. Do not treat a deal-by-deal waterfall as “no clawback risk.” Do not fold clawback repayment into DPI without a dated cash event. Keep carry already paid on the waterfall row, and keep the correction obligation here.

Interim testing vs end-of-fund surprise

If the LPA only tests clawback at liquidation, an early winner that paid carry can look fine for years while later losers quietly create exposure. ILPA Principles 3.0 pushes interim disclosure for that reason: LPs should see actual and potential liabilities each reporting period, not a surprise letter at wind-down. When a GP reports a potential liability, record the as-of date, whether marks on unrealized deals are included, and the stated cure plan. If the GP is silent, mark “not disclosed” rather than filling the cell with your own model. Your estimate can live in a notes field labeled as yours. The official cell stays empty until the GP prints a number.

Also separate LP giveback (if any) from GP clawback. Some LPAs let the partnership reclaim distributions from LPs under narrow conditions. That is a different row. Mixing the two is how a GP carry correction disappears into an LP capital-account adjustment.

When the ledger holds

The row holds if the seven cells are copied from the LPA and GP disclosures (or marked missing). It fails when you invent exposure, assume gross-of-tax, or ignore an interim test date. Raziel's alternative asset dashboard is where fund cash events and documents should sit together. Raziel does not compute your clawback. Copy the seven columns.