A CFO's perspective on waterfall calculation in private equity

Former CFO at Centerbridge Partners, Jeffrey Gelfand explains the potential risks with waterfall calculations in private equity.
Typically, this calculation is managed in some ancient spreadsheet model and handed down from controller-to-controller, and this exercise, if performed incorrectly, can irreparably damage the GP/LP relationship.
When you are not the original maker of a model, there is a much higher likelihood that you don’t fully understand the logic behind it.