A clawback with no escrow is a promise. Does anyone treat it as more?

The escrow question matters less to me than which return the lookback measures against. I've read two deals this year where the clawback trued up to the pref only, not to the full 8% compounded plus return of capital, and in one of them the GP could keep interim promote even on a deal that returned 0.9x. That's a drafting outcome, not a market outcome.

On your actual split, fathom: a deal-by-deal waterfall with an unfunded clawback is a bet on the sponsor's balance sheet at liquidation, and you can't underwrite that from the PPM. You can underwrite it from a personal financial statement, which some sponsors will give you and most won't. I've asked four times and gotten two.

The payroll argument is real. I've watched a small shop with a European waterfall carry three years of asset management on a 1.5% fee and it was thin enough that the good people left. But the answer to that is a bigger asset management fee, priced out loud in the fee stack where I can see it, rather than interim promote functioning as an unsecured advance against a number nobody knows yet. I'd rather pay 2% of collections and have the promote sit behind a full return of capital.

One assumption doing the work in all of this: whether the sale is a real exit or a refi in year 5 with a big distribution and no true-up event. Check whether a refinance triggers the lookback. Half the LPAs I read say it doesn't.

I read the same shape of clause on a smaller deal and got stuck on a simpler thing than you two did. Who does the final accounting? In mine it was the GP, with the LP's only remedy being a request for an audit at LP expense after written notice. So the clawback is calculated by the party who owes it.

I didn't invest, though I'm not sure that was the right call, since the sponsor's record was better than anyone else I was looking at. Voting for a hard holdback but I recognize that narrows my list a lot.