General Partner & Limited Partner (GP/LP)

The two main parties in a PE fund structure: the GP manages investments and operations, while LPs provide capital and have limited liability and involvement.

In private equity fund structures, General Partners (GPs) manage the fund while Limited Partners (LPs) provide capital.

General Partner (GP)

Role:

  • Makes investment decisions
  • Sources and executes deals
  • Manages portfolio companies
  • Handles fund operations

Economics:

  • Management fees (2% annually)
  • Carried interest (20% of profits)
  • GP commitment (1-5% of fund size)

Liability:

  • Unlimited personal liability
  • Fiduciary duty to LPs

Limited Partner (LP)

Role:

  • Provides capital
  • Receives distributions
  • Limited governance rights
  • No day-to-day involvement

Economics:

  • 80% of profits (after preferred return)
  • Capital calls over investment period
  • Distributions during harvest period

Liability:

  • Limited to committed capital
  • Cannot participate in management

Common LP Types

TypeTypical Allocation
Pension funds10-20% of portfolio
Endowments15-30% of portfolio
Family offices10-25% of portfolio
Fund of funds100% (diversified)
High-net-worth individuals5-15% of portfolio

LP Advisory Committee (LPAC)

  • Represents LP interests
  • Reviews conflicts of interest
  • Approves valuation policies
  • Typically 5-7 largest LPs

Related Terms

management feecarried interestcapital call

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