The amount of capital being sought for high-return private equity real estate funds is at a record high. At the same time, many institutional investors are sidelined by the denominator effect or by a tactical decision to move slowly in an uncertain market that is awash in fund offerings.

In this environment, many quality managers are struggling to reach fund-raising targets, and several of them have offered to improve terms in an effort to gain a competitive advantage over the field (or remain competitive with the field).

For investors to take full advantage of this opportunity, and for investors to make informed relative decisions among different funds in any market, an understanding of the real impact of fund terms is critical. Some terms can have a surprisingly large impact. For example, shifting from an interim-carry waterfall (distributing carried interest as investments are realized) to a fully-pooled waterfall (with a back-ended carry) can have the same impact o