Distribution refers to the payment of returns by an investment fund to its investors (Limited Partners, or LPs), derived from the fund’s income-generating activities or capital events. These payments may stem from:

• Interest income (e.g., from private debt instruments or fixed-income assets)

• Dividend income (e.g., from equity positions in portfolio companies)

• Capital gains (e.g., from exits via trade sales, IPOs, or recapitalisations)

In private market funds, distributions are typically irregular and event-driven rather than periodic, often coinciding with investment exits or liquidity events. The distribution policy, including timing, thresholds, and reinvestment provisions, is defined in the fund’s Limited Partnership Agreement (LPA) and shaped by the fund’s strategy (e.g., yield-focused vs. growth-oriented).

Distributions are often structured through a distribution waterfall, which prioritizes the return of capital and preferred returns to LPs before allocating carried interest to the General Partner (GP).