Limited partner (LP) is the investor side of a fund partnership — capital providers with limited liability and no day-to-day control.

How it works

LPs sign a limited partnership agreement, pledge commitments, and fund capital calls when the GP invests or pays expenses. They receive distributions from exits and pay carried interest share to the GP per the waterfall. Typical LPs include public pensions, university endowments, insurance companies, family offices, and funds of funds.

LPs evaluate GPs through track record, team stability, terms, and portfolio construction fit. They receive quarterly reports and annual meetings but rarely sit on company boards.

Why it matters

• LPs: Diversification across vintages and strategies; pacing commitments to avoid over-allocation to illiquid assets.
• GPs: LP base quality affects re-up rates on the next fund. Concentrated LP lists can help or hurt depending on reference checks.
• Founders: Indirect relationship — but GP behavior on follow-ons and reserves reflects LP pressure on DPI and fund life.

LPs differ in constraints: pensions face public scrutiny on fees; endowments have perpetual horizons; funds of funds layer additional fees. Each LP type evaluates GPs differently on track record length and team stability.

Some LPs seek co-investment rights to reduce fee load on large checks — side letters document those rights outside the main LPA.

Common mistake

Using “LP” to mean any investor in a startup. Startup investors are often angels or institutions on the cap table, not fund LPs — unless they invest through a fund vehicle.

Related ideas

• Limited Partnership Agreement (LPA)
• Limited Partner Commitment
• GP and carried interest