Answer: Whole-of-fund (European) waterfall.

The correct answer is **C** because, in a whole-of-fund (European) waterfall, all distributions are allocated to the limited partners (LPs) as deals are exited. The general partner (GP) does not participate in any profits until the LPs have received their initial investment and the hurdle rate has been met. This method is more advantageous to LPs compared to the deal-by-deal (American) waterfall, where the GP collects performance fees on a per-deal basis, often before LPs achieve their preferred return on the entire fund.

Author: LeetQuiz Editorial Team