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The General Partner (GP), sometimes referred to as the Deal Lead, is the individual or entity that manages and makes the investment decisions for a private equity or venture capital fund. GPs play a pivotal role in the structure of such funds and are instrumental in the fund's overall performance.
GPs are responsible for various tasks, including raising capital for the fund, identifying and evaluating potential investment opportunities, executing deals, managing the fund's portfolio, and strategizing exits to generate returns.
Unlike Limited Partners (LPs), who provide capital and have limited liability, GPs have unlimited liability. This means they can be held personally liable for the debts and obligations of the fund.
GPs typically earn a management fee, which is a percentage of the fund's total assets under management (AUM). They also earn carried interest, a share of the fund's profits, as performance-based compensation. The traditional fee structure is known as "2 and 20", which means a 2% management fee and 20% carried interest, although the actual rates can vary.
GPs have a fiduciary duty to act in the best interest of the fund's LPs. This includes managing the fund's investments responsibly, disclosing any potential conflicts of interest, and acting with transparency.
The relationship between GPs and LPs is governed by a Limited Partnership Agreement (LPA), which outlines the terms of the partnership, the rights and obligations of both parties, the fund's investment strategy, fee structure, and other key details.
The role of the GP is critical in a private equity or venture capital fund. Their skills, expertise, and decision-making abilities can significantly impact the fund's performance and the return on investment for LPs.
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