Does a GP catch that tracks IRR but not MOIC actually protect the LP

The assumption doing the most work in that term sheet is that IRR and MOIC are measuring the same thing. They are not, and the catch-up clause you described exploits exactly that gap. IRR is time-weighted; a slow bleed of distributions over six years can satisfy an 8% preferred hurdle on an IRR basis while the capital multiple is quietly mediocre. The LP signed up for a return, got a number that reads as one, and ends up at 1.18x wondering what happened.

Your 1.5x net MOIC floor before catch-up is the correct structural response. Your attorney is right that it complicates distributions, because you now have two independent tests that must both clear before the GP participates in profits. The waterfall has to run the IRR test, then the MOIC test, and only release catch-up when both pass. That is more conditional logic in the distribution model, more explanation required at close, and more friction when a deal exits early at a strong multiple but low IRR. Worth it, for the reason you already identified: it removes the scenario where time does the GP's math without the LP actually getting paid well.

The risk you did not mention is the drag that MOIC floors create on the GP's incentive in hold-period decisions. If the GP needs 1.5x net before they see carry, they may resist a clean exit at year three at 1.45x gross, because even if the IRR is excellent, the catch-up has not triggered. That can push hold periods out in ways that serve the GP's timeline, not the LP's. Worth writing an override provision that handles early exits above a defined gross IRR threshold, so the MOIC floor does not inadvertently create its own set of misaligned incentives.

On first-time fund LPs reading catch-up language: most are not reading it closely, which is a separate problem. Institutional LPs with their own counsel will push back. Family office money and high-net-worth individuals often do not.

How are you handling the interaction between the MOIC floor and a portfolio-level versus deal-by-deal distribution model in your waterfall?

The IRR-only catch-up is genuinely dangerous in the way you've identified, and the seven-year scenario is the cleaner proof because time compression is doing all the work for the GP without any real value creation. The piece worth adding to your MOIC floor structure is how you handle the sequencing when both tests have to clear: if the MOIC floor gates the catch-up but distributions run quarterly, you need language that holds the GP's catch-up pool in escrow rather than distributing it, because a fund that hits 1.5x net at year four and then gives back value at year six has a clawback problem that is harder to enforce than a gate that simply delays the trigger.

On first-time fund LPs reading this closely: most are not, and the ones who are tend to focus on the preferred return percentage rather than the catch-up mechanics, which is exactly where a GP with a short-hold, moderate-multiple strategy can extract outsized carry on deals that feel fine until someone builds the net-net table.

What does your distribution waterfall do at the fund level if one asset exits early at a strong multiple and pulls the GP through the MOIC floor, and a later asset then drags the blended net multiple back below 1.5x?