Quick Answer

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In a private investment fund, the GP manages the fund and makes the investment decisions. The LPs provide most of the capital.

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GP = General Partner

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LP = Limited Partner

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A family office investing in a private equity or venture capital fund is typically an LP.

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The private equity or venture capital firm managing that fund acts as the GP.

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What Is an LP?

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An LP, or Limited Partner, is an investor in a private fund.

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LPs can include:

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• Family offices
• Pension funds
• Endowments
• Foundations
• Sovereign wealth funds
• Insurance companies
• Institutional investors
• High-net-worth investors

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The LP commits capital to the fund.

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For example:

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A family office commits $10 million to a private equity fund.

The family office is the LP.

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What Is a GP?

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The General Partner, or GP, manages the fund.

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The GP typically:

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• Raises the fund
• Finds investments
• Performs due diligence
• Executes transactions
• Manages portfolio investments
• Determines when investments are sold
• Reports to investors
• Makes capital calls
• Distributes proceeds

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The GP therefore makes the investment decisions on behalf of the partnership.

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ILPA's private-market principles are specifically designed around transparency, governance and alignment between LPs and GPs.

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Simple Example

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Imagine:

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ABC Private Equity launches a $1 billion fund.

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A family office commits $20 million.

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ABC Private Equity is the:

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GP

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The family office is the:

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LP

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ABC then finds a company it wants to acquire.

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The GP may issue a capital call asking the family office to fund $5 million of its $20 million commitment.

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Who Controls the Investments?

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Generally:

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GP = makes investment decisions

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LP = provides capital

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The precise rights and responsibilities of both parties are established through the fund's legal documents, particularly the Limited Partnership Agreement, or LPA.

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ILPA describes the LPA as the legally binding document establishing the fund's operating rules and the rights and responsibilities of its parties.

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How Does the GP Get Paid?

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A GP's economics commonly include:

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Management Fees

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Fees used to operate the investment-management business and fund.

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Carried Interest

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A share of investment profits, subject to the terms of the fund.

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The exact economics vary significantly between funds.

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What Does the LP Receive?

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The LP receives its share of:

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• Investment distributions
• Remaining fund value
• Investment performance

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based on its ownership and the fund's distribution terms.

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What Is the LPAC?

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Some LPs may also participate in an:

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LPAC — Limited Partner Advisory Committee

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The LPAC can provide oversight around matters such as conflicts of interest.

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It does not generally take over the GP's day-to-day investment decisions. ILPA emphasizes the LPAC's role in reviewing conflicts and other matters requiring investor oversight.

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How MyFO Helps LPs and GPs

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Family offices often participate in private investments from both sides of the fund structure. They may invest as an LP, but many families also act as a GP, creating their own funds or investment vehicles to co-invest with other families or outside investors. This is also common among real estate families that create entities or funds for individual development projects.

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MyFO is designed to track both LP and GP positions.

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For LP investments, MyFO can track:

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• Commitments
• Capital calls
• Distributions
• NAV
• Unfunded commitments
• Performance metrics
• Quarterly statements
• K-1s and tax documents
• Subscription and related documents

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This information is connected to the underlying fund, ownership entity, cash flows and consolidated family reporting, making it easier to understand how individual LP positions fit into the family's overall portfolio.

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For families acting as a GP, MyFO can also track the funds and investment structures they manage, including the family's ownership and economic interests within those entities.

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MyFO's cash-flow forecasting capabilities can be applied to both LP and GP positions, helping the family office understand expected future cash flows across investments where the family is providing capital as well as investments or funds where it acts as the GP.

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For families with dozens or even hundreds of private investments, this creates a consolidated view of their LP positions, GP positions, ownership, performance, documents and expected cash flows rather than managing each investment or entity separately.

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In One Sentence

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GP = manages the fund.

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LP = invests in the fund.

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For most family offices investing in private funds, the family office is the LP.

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