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5:00Private Equity Mechanics: Capital Calls, the J-Curve, and the Carry Waterfall
An LP signs up for $10m but doesn't wire a cent on day one. For three years they only send money and watch their account go red — then the cheques start coming back, and the order they arrive in decides who gets rich.
A private equity fund is a blind-pool, drawdown vehicle with a ~10-year life. Limited Partners (LPs — pensions, endowments, sovereign funds) sign a commitment, not a cheque. The General Partner (GP) only pulls the cash when it finds a deal. Understanding PE means understanding three linked mechanics: how money goes *in* (capital calls), why the return curve looks *ugly first* (the J-curve), and how profits are *split* (the carry waterfall).
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