{"id":3817,"date":"2026-10-15T01:28:31","date_gmt":"2026-10-14T16:28:31","guid":{"rendered":"https:\/\/slowsteps.com\/?p=3817"},"modified":"2026-10-15T01:28:31","modified_gmt":"2026-10-14T16:28:31","slug":"why-equalisation-exists","status":"publish","type":"post","link":"https:\/\/slowsteps.com\/en\/podcast\/why-equalisation-exists\/","title":{"rendered":"Episode 10: Why Equalisation Exists &#8211; Why Fairness Matters Among Investors"},"content":{"rendered":"\n<div class=\"wp-block-bogo-language-switcher\"><ul class=\"bogo-language-switcher list-view\"><li class=\"en-US en current first\"><span class=\"bogoflags bogoflags-us\"><\/span> <span class=\"bogo-language-name\"><a rel=\"alternate\" hreflang=\"en-US\" href=\"https:\/\/slowsteps.com\/en\/wp-json\/wp\/v2\/posts\/3817\/\" title=\"English\" class=\"current\" aria-current=\"page\">English<\/a><\/span><\/li>\n<li class=\"ja last\"><span class=\"bogoflags bogoflags-jp\"><\/span> <span class=\"bogo-language-name\"><a rel=\"alternate\" hreflang=\"ja\" href=\"https:\/\/slowsteps.com\/wp-json\/wp\/v2\/posts\/3817\/\" title=\"Japanese\">\u65e5\u672c\u8a9e<\/a><\/span><\/li>\n<\/ul><\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><em>This articles is based on a <a href=\"https:\/\/youtu.be\/WxfzPVoy9xk\" target=\"_blank\" rel=\"noopener\">Podcast<\/a> episode of a same title:<\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Greetings from Ho Chi Minh City.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Every October I find myself back in Vietnam. This year is no different.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">As I travelled from the airport into the city, I found myself comparing what I was seeing to <a href=\"https:\/\/slowsteps.com\/en\/podcast\/why-waterfalls-exist\/\" data-type=\"post\" data-id=\"3771\" target=\"_blank\" rel=\"noopener\">Dar es Salaam, Tanzania<\/a>, where I had been only a few weeks earlier.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Both cities are growing.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The difference is largely one of timing.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Perhaps ten years.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Perhaps twenty.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">One city appears to be following a path the other has already travelled.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Investment often looks very much like that. It is, in many ways, a study of time.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And so are funds.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Many of the structures used within funds exist because people enter the same investment opportunity at different points in time.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The challenge is simple:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">How do we treat those investors fairly?<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">In the previous article, I wrote about waterfalls and the relationship between General Partners (GPs) and Limited Partners (LPs).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The question was:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">What is fair between managers and investors?<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">This time, the question changes slightly.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">What is fair among investors themselves?<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">That is where equalisation begins.<\/p>\n\n\n\n<!--more-->\n\n\n\n<h2 class=\"wp-block-heading\">Fairness Is Not Only a GP-LP Problem<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">When people think about fund economics, they often focus on the relationship between GPs and LPs.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">How much carried interest is fair?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">What should the hurdle rate be?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Should waterfalls be Deal-by-Deal or Whole Fund?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">All of those are important questions.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, private funds face another challenge.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Even LPs within the same fund are not always in the same position.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">They may enter at different times.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">They may see different information before investing.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">They may take different levels of risk.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And if those differences exist, how should they be reflected?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Equalisation is one answer.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h1 class=\"wp-block-heading\">A Hedge Fund Example<\/h1>\n\n\n\n<p class=\"wp-block-paragraph\">Let us start with a simple example.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"572\" src=\"https:\/\/i0.wp.com\/slowsteps.com\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_wgmrvcwgmrvcwgmr.jpeg?resize=1024%2C572&#038;ssl=1\" alt=\"\u30d8\u30c3\u30b8\u30d5\u30a1\u30f3\u30c9\u306e\u6210\u529f\u5831\u916c\u3068\u30a4\u30b3\u30e9\u30a4\u30bc\u30fc\u30b7\u30e7\u30f3\u306e\u8aac\u660e\u56f3\u3002\u6295\u8cc7\u5bb6A\u3068B\u306e\u6295\u8cc7\u306e\u9055\u3044\u3001\u30d5\u30a1\u30f3\u30c9\u306e\u56de\u5fa9\u3068\u5229\u76ca\u306e\u8abf\u6574\u306e\u6d41\u308c\u3092\u793a\u3059\u30a4\u30e9\u30b9\u30c8\u3002\" class=\"wp-image-3811\" srcset=\"https:\/\/i0.wp.com\/slowsteps.com\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_wgmrvcwgmrvcwgmr.jpeg?resize=1024%2C572&amp;ssl=1 1024w, https:\/\/i0.wp.com\/slowsteps.com\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_wgmrvcwgmrvcwgmr.jpeg?resize=300%2C167&amp;ssl=1 300w, https:\/\/i0.wp.com\/slowsteps.com\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_wgmrvcwgmrvcwgmr.jpeg?resize=768%2C429&amp;ssl=1 768w, https:\/\/i0.wp.com\/slowsteps.com\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_wgmrvcwgmrvcwgmr.jpeg?resize=1536%2C857&amp;ssl=1 1536w, https:\/\/i0.wp.com\/slowsteps.com\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_wgmrvcwgmrvcwgmr.jpeg?resize=2048%2C1143&amp;ssl=1 2048w, https:\/\/i0.wp.com\/slowsteps.com\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_wgmrvcwgmrvcwgmr.jpeg?resize=1320%2C737&amp;ssl=1 1320w\" sizes=\"auto, (max-width: 1000px) 100vw, 1000px\" \/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Assume a fund launches with a NAV of 100.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Investor A subscribes at launch.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Several months later, the NAV falls to 95.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Investor B enters at that point.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">By year-end, the NAV has recovered to 110.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Now consider performance fees.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Investor A earned a gain of 10.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Investor B earned a gain of 15.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Both investors end at the same NAV.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Yet they clearly experienced different economic outcomes.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Should they pay the same performance fee?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Most investors would say no.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This is where equalisation mechanisms appear.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The objective is not to alter the NAV.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The objective is to ensure that investors bear the appropriate economic impact of the gains they personally benefited from.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h1 class=\"wp-block-heading\">Equalisation Is An Adjustment for the Benefit of Hindsight<\/h1>\n\n\n\n<p class=\"wp-block-paragraph\">One way I think about equalisation is this:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">It is an adjustment for the benefit of hindsight.<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">Investor A entered without knowing what would happen.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Investor B entered later.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Investor B had information that Investor A never had.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Even if that difference is small, it exists.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Equalisation attempts to account for it.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The mechanism itself varies from fund to fund.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The underlying principle does not.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Investors who participate under different circumstances should not automatically be assumed to have taken identical risks.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h1 class=\"wp-block-heading\">The Same Question Appears in Private Equity<\/h1>\n\n\n\n<p class=\"wp-block-paragraph\">Many people associate equalisation with hedge funds.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The same economic issue appears in private equity.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Consider a fund that has already completed a first closing.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<figure class=\"wp-block-image size-large\"><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"572\" src=\"https:\/\/i0.wp.com\/slowsteps.com\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_ob6whvob6whvob6w.jpeg?resize=1024%2C572&#038;ssl=1\" alt=\"\u30d7\u30e9\u30a4\u30d9\u30fc\u30c8\u30fb\u30a8\u30af\u30a4\u30c6\u30a3\u306e\u516c\u5e73\u6027\u3068\u30a4\u30b3\u30e9\u30a4\u30bc\u30fc\u30b7\u30e7\u30f3\u306b\u95a2\u3059\u308b\u56f3\u3002\" class=\"wp-image-3814\" srcset=\"https:\/\/i0.wp.com\/slowsteps.com\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_ob6whvob6whvob6w.jpeg?resize=1024%2C572&amp;ssl=1 1024w, https:\/\/i0.wp.com\/slowsteps.com\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_ob6whvob6whvob6w.jpeg?resize=300%2C167&amp;ssl=1 300w, https:\/\/i0.wp.com\/slowsteps.com\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_ob6whvob6whvob6w.jpeg?resize=768%2C429&amp;ssl=1 768w, https:\/\/i0.wp.com\/slowsteps.com\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_ob6whvob6whvob6w.jpeg?resize=1536%2C857&amp;ssl=1 1536w, https:\/\/i0.wp.com\/slowsteps.com\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_ob6whvob6whvob6w.jpeg?resize=2048%2C1143&amp;ssl=1 2048w, https:\/\/i0.wp.com\/slowsteps.com\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_ob6whvob6whvob6w.jpeg?resize=1320%2C737&amp;ssl=1 1320w\" sizes=\"auto, (max-width: 1000px) 100vw, 1000px\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">Capital has been called.<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Investments have already been made.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Several months later, a second investor joins the fund.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">From a legal perspective, dilution can solve part of the problem.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The later investor acquires an economic interest in the portfolio.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But another question immediately appears:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">Did both investors truly take the same risk?<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">The first investor entered a blind pool.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The second investor could see at least part of the portfolio before committing capital.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Those situations are not identical.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The first investor accepted uncertainty that the second investor never faced.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Equalisation attempts to compensate for that difference.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h1 class=\"wp-block-heading\">Someone Funded the Position<\/h1>\n\n\n\n<p class=\"wp-block-paragraph\">I often find it useful to view this through a funding lens.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Suppose Investor A funded the investment months before Investor B joined.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">When Investor B eventually enters, part of Investor A&#8217;s capital is effectively replaced.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">From that perspective, Investor A has been financing the position on Investor B&#8217;s behalf.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If capital was being funded earlier by one investor, should there be compensation for the time value of that capital?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This is where equalisation interest, catch-up payments and similar concepts begin to appear.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Interestingly, this brings us back to the hurdle-rate discussion from the waterfall article.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In both cases, the question is remarkably similar:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">Who bore the economic cost of carrying the capital?<\/p>\n<\/blockquote>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h1 class=\"wp-block-heading\">When Templates Become a Substitute for Thinking<\/h1>\n\n\n\n<p class=\"wp-block-paragraph\">At this point, a different concern appears.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Occasionally I encounter provisions in domestic documentation that seem to exist simply because they appeared in a template.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Templates are useful.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Templates are necessary.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But templates are not answers.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A provision should exist because it solves a problem.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Not because it appeared in a previous document.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">When equalisation adjustments are treated as ordinary fund profits, strange economic outcomes can emerge.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">People can end up paying amounts that effectively return to themselves through the allocation mechanism.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The accounting may work.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The economics often become difficult to explain.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Whenever I see situations like this, I find myself asking a simple question:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">What problem is this provision actually trying to solve?<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">The answer matters far more than the wording itself.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h1 class=\"wp-block-heading\">Who Should Receive Gains Realised Before the Final Closing?<\/h1>\n\n\n\n<p class=\"wp-block-paragraph\">Another interesting example appears when an investment is realised before the final closing.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Suppose early investors funded a deal.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The investment is sold successfully.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Only later does a new investor join the fund.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Should that new investor participate in gains generated before becoming an investor?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">I have always found this question revealing.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The answer may vary depending on the structure.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The underlying principle remains the same.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The gains arose from risks borne by someone.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Understanding who accepted those risks is usually the starting point for understanding who should receive the associated rewards.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h1 class=\"wp-block-heading\">Administrative Convenience Is Not Fairness<\/h1>\n\n\n\n<p class=\"wp-block-paragraph\">From an administration perspective, it is often easier when everyone receives identical treatment.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The calculations become simpler.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The reporting becomes easier.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The recordkeeping becomes cleaner.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But convenience and fairness are not the same thing.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A fund administrator&#8217;s job is not to choose the easiest answer.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It is to implement the agreed answer.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The same principle applies to exclusion provisions, excusal rights and other special allocations.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The calculations may become complicated.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The complexity exists because economic reality is complicated.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The solution is not to ignore the complexity.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The solution is to respect it.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h1 class=\"wp-block-heading\">Equalisation Is Not an Accounting Adjustment<\/h1>\n\n\n\n<p class=\"wp-block-paragraph\">People often describe equalisation as a technical adjustment.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">An accounting process.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A calculation.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A spreadsheet problem.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">I don&#8217;t think that captures what it really is.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Equalisation is an attempt to answer a fairness question.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Who took the risk?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Who provided the capital?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Who possessed the information?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Who arrived later?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Only after answering those questions does the adjustment itself become meaningful.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h1 class=\"wp-block-heading\">Conclusion<\/h1>\n\n\n\n<p class=\"wp-block-paragraph\">In the previous article, the question was:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">What is fair between GPs and LPs?<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">This time, the question becomes:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">What is fair among LPs themselves?<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">Equalisation exists because investors participate under different conditions and at different points in time.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Without adjustment, those differences can create unintended advantages and disadvantages.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The purpose of equalisation is not to make calculations more complicated.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The purpose is to preserve fairness.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The more time I spend in this industry, the more I suspect that funds are not merely investment vehicles.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">They are systems for allocating capital, certainly.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But they are also systems for designing fairness.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Waterfalls address fairness between managers and investors.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Equalisation addresses fairness among investors.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Both are attempts to answer the same underlying question:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">How should people who participate together be treated fairly?<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">And perhaps that question is far more important than any calculation itself.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Why should investors who enter a fund at different times be treated fairly? This article explores equalisation, funding costs, and the broader question of fairness among LPs in private fund structures.<\/p>\n","protected":false},"author":94403148,"featured_media":3813,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"advanced_seo_description":"Equalisation is not merely an accounting adjustment. It is a mechanism designed to ensure fairness among investors who enter the same fund at different times and under different circumstances.","jetpack_seo_html_title":"Why Equalisation Exists: Fairness Among Investors in Private Funds","jetpack_seo_noindex":false,"jetpack_seo_schema_type":"","_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_locale":"en_US","_original_post":"https:\/\/slowsteps.com\/?p=3808","_wpcom_ai_launchpad_first_post":false,"_jetpack_feature_clip_id":0,"_jetpack_hide_featured_image":false,"_jetpack_featured_image_duplicate_dismissed":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"{title}\n\n{excerpt}\n\n{url}","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":true,"token":"eyJpbWciOiJodHRwczpcL1wvc2xvd3N0ZXBzLmNvbVwvd3AtY29udGVudFwvdXBsb2Fkc1wvMjAyNlwvMTBcL0dlbWluaV9HZW5lcmF0ZWRfSW1hZ2VfZXQzcG9vZXQzcG9vZXQzcC0xMDI0eDU3Mi5qcGVnIiwidHh0IjoiRXBpc29kZSAxMDogV2h5IEVxdWFsaXNhdGlvbiBFeGlzdHMgJiM4MjExOyBXaHkgRmFpcm5lc3MgTWF0dGVycyBBbW9uZyBJbnZlc3RvcnMiLCJ0ZW1wbGF0ZSI6ImhpZ2h3YXkiLCJmb250IjoiIiwiYmxvZ19pZCI6MjM4NDQ4MDU0fQ.5riFA6Pp6qZ_vfYBL-pri93p80D0fz6mTu3hxVFdMMcMQ"},"version":2},"_wpas_customize_per_network":false,"jetpack_post_was_ever_published":false},"categories":[775587852,775587849,775587853,775587843],"tags":[775587960,775587919,775587842,775588032,775588035,29949403,775588043,775588026,775588036,29172],"class_list":["post-3817","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-foundations","category-fund-structuring","category-operations-governance","category-podcast","tag-alternative-investments","tag-capital-call","tag-equalisation","tag-fund-administration","tag-fund-economics","tag-fund-structure","tag-investor-fairness","tag-limited-parter","tag-lpa","tag-private-equity","en-US"],"jetpack_publicize_connections":[],"jetpack_likes_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/pg8vem-Zz","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"https:\/\/i0.wp.com\/slowsteps.com\/wp-content\/uploads\/2026\/10\/Gemini_Generated_Image_et3pooet3pooet3p.jpeg?fit=2752%2C1536&ssl=1","_links":{"self":[{"href":"https:\/\/slowsteps.com\/wp-json\/wp\/v2\/posts\/3817","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/slowsteps.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/slowsteps.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/slowsteps.com\/wp-json\/wp\/v2\/users\/94403148"}],"replies":[{"embeddable":true,"href":"https:\/\/slowsteps.com\/wp-json\/wp\/v2\/comments?post=3817"}],"version-history":[{"count":6,"href":"https:\/\/slowsteps.com\/wp-json\/wp\/v2\/posts\/3817\/revisions"}],"predecessor-version":[{"id":3825,"href":"https:\/\/slowsteps.com\/wp-json\/wp\/v2\/posts\/3817\/revisions\/3825"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/slowsteps.com\/wp-json\/wp\/v2\/media\/3813"}],"wp:attachment":[{"href":"https:\/\/slowsteps.com\/wp-json\/wp\/v2\/media?parent=3817"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/slowsteps.com\/wp-json\/wp\/v2\/categories?post=3817"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/slowsteps.com\/wp-json\/wp\/v2\/tags?post=3817"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}