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
| Type | Typical Allocation |
|---|---|
| Pension funds | 10-20% of portfolio |
| Endowments | 15-30% of portfolio |
| Family offices | 10-25% of portfolio |
| Fund of funds | 100% (diversified) |
| High-net-worth individuals | 5-15% of portfolio |
LP Advisory Committee (LPAC)
- Represents LP interests
- Reviews conflicts of interest
- Approves valuation policies
- Typically 5-7 largest LPs