Limited partner (LP)

A limited partner is an investor that commits capital to a fund but does not manage it, with liability limited to its commitment. LPs include family offices, sovereign and pension funds, endowments, funds of funds and insurers.

Relevant to fund placement and private markets.

A limited partner commits capital to a fund but does not manage it, with liability limited to its commitment. The general partner manages the fund — sourcing, investing and returning capital — and typically earns a management fee plus a share of profits known as carried interest, while bearing management liability.

Limited partners back general partners on the strength of strategy, track record, team and governance. Diligence typically also covers fund terms, alignment of interest between manager and investors, and how the strategy fits the LP’s own portfolio. Family offices, pension funds and endowments each weight these priorities differently.