Glossary · Fundraising

What is a general partner?

A general partner, or GP, is the firm that runs a fund, makes its investment decisions and carries legal responsibility for it. The term is also used for the manager.

In practice

In a limited partnership, the GP is usually a separate legal entity from the management company that employs the investment team. Because a general partner has unlimited liability for the partnership’s obligations, it is usually a thinly capitalized special-purpose entity formed for the one fund. Its powers and limits are set out in the LPA, and it is the counterparty to the limited partners.

An example

Round numbers, not a real fund

Say a firm raises a $1 billion fund. The firm is the GP: it picks the investments, runs the fund and earns the management fee and carry.

Why it matters

The GP is who investors are really backing, and the one they hold to account.

A definition, not advice; where usage varies the entry says so. Something wrong? Tell the desk.

Related terms

Limited partnerA limited partner, or LP, is an investor in a fund. It supplies most of the capital, takes no part in running it, and typically risks only its commitment.
LPAThe limited partnership agreement, or LPA, is a private fund’s main contract. It sets the fees, carry, investment limits and the rights of the manager and the investors.
GP commitmentThe GP commitment is the money a manager and its partners invest in their own fund alongside investors, often a few percent of the fund’s total.
Carried interestCarried interest is the share of a fund’s profits, typically 20%, that the manager earns after investors get their money back and clear the preferred return.
Key personA key person clause lets investors pause new investments, or sometimes end the fund’s investing, if named senior people leave or stop giving the fund enough of their time.

The terms, in the news each morning.

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