An American waterfall pays carry deal by deal. A European waterfall pays it only after investors have all their money back plus the preferred return. Which would you rather be?
What the film says
In private equity, two funds can make the same profit, and one manager gets paid years earlier. In an American waterfall, carry is paid deal by deal. The first deal sells at a profit, and the manager takes its share. In a European waterfall, investors first get back all their money, plus the preferred return, across the whole fund. Only then does the manager share. American pays sooner, so it needs a clawback. European makes the manager wait.
In the glossary: European waterfall
A simple example with round numbers, not advice. Terms vary by fund.
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