Asset management and funds
Limited partner (LP)
An investor that puts money into a private equity or venture fund.
Last reviewedWhat does Limited partner (LP) mean?
A limited partner is an investor in a private fund, such as a pension fund, insurer, university endowment, sovereign wealth fund or family office. LPs commit money up front but pay it in only when the general partner calls it for deals (a capital call). Their liability is limited to what they committed, and they have no say in daily investment choices. Example: an LP commits 50 million to a fund; the GP calls 10 million in year one for the first two deals and the rest over the next few years. LPs judge funds on net returns after fees and carry, measured by IRR and MOIC.
Where does it come up in case interview prep?
- How private equity and venture capital funds workLesson in Private equity and venture capital
- LBO returns and fund economicsLesson in Private equity and venture capital
- Private equity and venture capital: players, trends, regulation, and how to crack the casesLesson in Private equity and venture capital
Related terms
- General partner (GP)The firm that raises and runs a private equity or venture fund.
- Carried interest (carry)The general partner's share of a fund's profits, usually 20 percent.
- IRR (internal rate of return)The discount rate at which NPV is exactly zero.
- MOIC (multiple on invested capital)How many times the money invested comes back.
- Sovereign wealth fund (SWF)A state-owned investment fund, often built from oil revenues or reserves.
- Assets under management (AUM)The total market value of the money a firm manages for clients.
- Net flows (net new money)New client money coming in minus money taken out.
- Active versus passive investingTrying to beat the market versus simply tracking it at low cost.