Is preferred return guaranteed?

No — preferred return is a distribution priority, not a guarantee. If the deal underperforms, LP may not receive their full preferred return.

Simple vs compound preferred return?

Simple preferred return: 8% × equity per year. Compound: unpaid pref accrues and earns return on itself. Compound is better for LPs, worse for GP.

What happens to unpaid preferred return?

In cumulative structures, unpaid preferred accumulates and must be paid before GP receives promote. In non-cumulative structures, unpaid pref is lost for that period.

Preferred Return Calculation LP Calculator

Calculate cumulative preferred return owed to LP investors before GP promote kicks in. Model accrual periods, compounding, catch-up provisions, and unpaid preferred carry-forward.

Principal ($)

Annual Rate (%)

Years

Compounding / Year

$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. Calculate cumulative preferred return owed to LP investors before GP promote kicks in. Model accrual periods, compounding, catch-up provisions, and unpaid preferred carry-forward. Use the lp preferred return result to inform your calculation.

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Frequently Asked Questions

Is preferred return guaranteed?

Simple vs compound preferred return?

What happens to unpaid preferred return?